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.
Variable costs directly impact the overall profitability of a business by increasing or decreasing based on the level of production or sales. When variable costs rise, it reduces the profit margin, while lower variable costs can lead to higher profits. Managing variable costs effectively is crucial for maximizing profitability in a business.
The break-even point increases when fixed costs increase or selling price decreases. It decreases when fixed costs decrease or selling price increases. Changes in variable costs or sales volume can also impact the break-even point.
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.
The contribution ratio is the relationship between total sales revenue and total variable costs. If the components change, such as an increase in sales revenue or a decrease in variable costs, the contribution ratio will increase. Conversely, if sales revenue decreases or variable costs increase, the contribution ratio 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
increases the variable cost
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.
Indirect material is normal fixed cost that is why it is allocated using some kind of ratio or formula.
When variable costs rise in a perfectly competitive industry, profits will decrease and output levels may decrease as well. This is because higher variable costs reduce the profit margins for firms, leading to lower overall profits. In response, firms may reduce their output levels to maintain profitability.
labor costs, raw material, transportation, etc