If material cost is variable cost then yes by decreasing material cost company can reduce total variable cost.
Variable cost per unit remains same per unit and has no impact on increase or decrease of sales.
This is generally done in areas such as manufacturing where processes can be more automated. By investing in machines and facilities, the fixed costs will increase, but variable labor costs will decrease.
Have a high amount of fixed costs relative to their variable costs. DOL= CM / Net Income We derive CM by the eqaution of Selling Price - Variable Costs If a firm has high variable costs relative to their selling price then they will have a small CM and therefore their DOL will decrease. Have a high amount of fixed costs relative to their variable costs. DOL= CM / Net Income We derive CM by the eqaution of Selling Price - Variable Costs If a firm has high variable costs relative to their selling price then they will have a small CM and therefore their DOL will decrease.
When fixed costs decrease sales also decrease. The formula for sales is sales = variable costs + fixed cost + net income 30 = 10 + 10 + 10 28 = 10 + 8 + 10
If direct material and direct labor remains fixed irrespective of production volume then these are fixed costs otherwise these are variable costs and normally these are variable costs because it varies with the production volume.
increases the variable cost
Indirect material is normal fixed cost that is why it is allocated using some kind of ratio or formula.
labor costs, raw material, transportation, etc
unit fixed costs and total variable cost
raw material cost variable cost because it change with volume of product i.e. the more you produce the more you have to purchase for raw material. Fixed cost are never change with changing in volume.Raw Material Cost is variable cost
Fixed costs are costs that DO NOT change in response to changes to activity levels.Variable costs are costs that change in proportion to changes in volume or activity.It's simple, you just have to remember:Fixed cost:Total - DO NOT changePer unit -CHANGES (usually, decrease)Variable cost:Per unit - SAMETotal -CHANGES
Cost can be either fixed cost or variable cost. Fixed costs are the costs that are fixed in nature and do not vary with the change in scale of production. Example of fixed costs are: factory rent. Variable costs vary with the change in scale of production. Example: Raw material cost Net Margin= Sales- Fixed cost- Variable cost Decrease in fixed costs lead to increase in margin of an organization; keeping all other things constant. Sometimes, benefit of decrease in fixed cost may be transferred to the consumer in the form of lower price. Lower price results in higher sales volume with lower sales margin per unit.