Managerial Accounting Discussion Questions: Fixed vs$.$ Variable Costs

$1.$ Misconceptions and Clarifications:

Verna Salsbury argues that fixed costs per unit change with production volume, while variable costs per unit stay constant. This seems counterintuitive!

Web Research: Briefly scan the web for resources that explain the concepts of fixed and variable costs.

Discussion: Explain why Verna's understanding might be mistaken. Clarify the true relationship between volume, fixed costs, and variable costs. Be sure to include specific examples $($e$.$g$.,$ rent vs$.$ raw materials$)$ to illustrate your points.

$2.$ Cost Structures and Volume Fluctuations:

Imagine Company A has a mostly fixed cost structure $($e$.$g$.,$ high rent, salaried employees$),$ while Company B has a mostly variable cost structure $($e$.$g$.,$ commission$-$based sales, pay$-$per$-$hour labor$).$

Web Research: Find real$-$world examples of companies with primarily fixed or variable cost structures.

Discussion: If both companies experience a sudden decrease in production volume, discuss the advantages and disadvantages of each cost structure in this scenario. Use the examples you found from your web research to support your claims.

$3.$ Risk and Cost Structures:

In general, is a fixed cost structure or a variable cost structure considered riskier for a business?

Web Research: Find online resources that discuss the relationship between cost structures and business risk.

Discussion: Explain your answer using the concepts of fixed and variable costs. Consider factors like economic downturns, changes in consumer demand, and economies of scale. How do these factors impact the risk associated with each cost structure? Provide examples from your web research to strengthen your arguments.