Hi I need help writing a reply to a classmate response in accounting class. it is due TODAY NOV 18, BY 10PM EASTERN TIME no less than 200 words with references and citations please. Plagarism free work please this will be sent through turnitin. Thank you
Many companies rely on variable costing. Variable cost pricing is commonly used when someone wants to enter a new market with an existing product line. The prices are based on variable costs and are very responsive when controlling operations in any level of management due to level of change during production (Fess, 1986).
In accounting, variable costs are costs that vary with production volume or business activity. They go high when a production company increases; output and decrease when the company slows production. Variable costs can also be referred to as unit-level costs. Variable costs differ from fixed costs in the sense that, it can remain relatively constant regardless of the company’s level of production or business activity. A combined company’s fixed costs and variable costs can also be known as total cost of production.
All costs can either be fixed costs or variable costs. Variable costs are product because they are allocated to units of production and recorded in inventory accounts, such as cost of goods sold. Even though managing inventory tends to focus only on the variable cost of inventory, it is essential that financial reporting must include both the variable cost and the fixed cost of inventory. Fixed costs are all costs that are not product related. Costs that do not fluctuate directly with production volume are fixed costs. Examples of fixed costs are various indirect costs and fixed manufacturing overhead costs while examples of variable costs are direct labor, direct materials, and variable overhead (Wilkinson, 2013)
Variable costs increases as level of sales in dollars or units is sold depending on your type of business, some examples include; cost of goods sold, sales commissions, shipping charges, delivery charges, costs of direct materials or supplies, wages of part-time or temporary employees, and sales or production bonuses. Variable costs change with the number of products that are put up for sale. Therefore, entrepreneurs learn how to make profit and be successful when they are able to identify and control their cost. It is important to understand cost well enough to be able to differentiate between variable and fixed costs (Barrat et. al. 2013)
Fess, Philip E. The Variable (Direct) Costing Concept in Perspective. Management Accounting (pre-1986); Apr 1969; 50, 8; Accounting & Tax
Wilkinson, Jim. 2013. WikiCFO. Variable Costs. Retrieved from http://strategiccfo.com/wikicfo/variable-cost/
Barratt et. al. 2013. How to calculate Variable Costs. Retrieved from http://strategiccfo.com/wikicfo/variable-cost/