Sales Commission varies with volume of sales that's why it is a variable cost as much the sales as much the sales commission, high sales high sales commission and vice versa.
If it varies with the level of production then it is variable cost otherwise it is fixed cost.
Sales commission is a variable cost because the amount of the account is subject to variation. Think about it: A used car salesman is paid a commission say of $500 for every car he sells for the month of October. If he sells only 2 cars, then the sales commission is $1000, If he sells a whopping 12 cars, then the sales commission is $6000!! Notice the variation in commission?? This is why it is a variable cost - because it is not a fixed cost, which you know regardless of what happens during the period.!
Formula for breakeven point = Fixed Cost / Contribution margin Contribution margin = Total Sales - variable cost SO using above mentioned formula break even sales can be found.
Break even point = Fixed cost / Contribution margin ratio Contribution margin ratio = (sales - variable cost ) / Sales
Breakeven point = Fixed Cost / Contribution margin Contribution margin = (Sales - Variable cost) / Sales
Sales Commission varies with volume of sales that's why it is a variable cost as much the sales as much the sales commission, high sales high sales commission and vice versa.
If it varies with the level of production then it is variable cost otherwise it is fixed cost.
Total Costs = Fixed Cost + Variable Cost soVariable Cost = Total Costs - Fixed Cost.
The Profit Volume (PV) Ratio is the ratio of Contribution over Sales. It measures the Profitability of the firm and is one of the important ratios for computing profitabilty. The Contribution is the extra amount of sales over variable cost. Contribution is also Fixed cost plus profit. Profit = Sales - Variable Cost - Fixed Cost. Thus Contribution is: Profit + Fixed Cost = Sales - Variable Cost. Therefore PV Ratio = (Contribution/Sales)X100. (This as a percentage of sales)
If advertising expense is fixed and has no concern with level of sales then it Is fixed but if it is changed with the change in level of sales then It is variable cost.
You cannot. Sales and variable costs must be functions of the units (quantities) sold and produced.
Sales commission is a variable cost because the amount of the account is subject to variation. Think about it: A used car salesman is paid a commission say of $500 for every car he sells for the month of October. If he sells only 2 cars, then the sales commission is $1000, If he sells a whopping 12 cars, then the sales commission is $6000!! Notice the variation in commission?? This is why it is a variable cost - because it is not a fixed cost, which you know regardless of what happens during the period.!
The Profit Volume (PV) Ratio is the ratio of Contribution over Sales. It measures the Profitability of the firm and is one of the important ratios for computing profitabilty. The Contribution is the extra amount of sales over variable cost. Contribution is also Fixed cost plus profit. Profit = Sales - Variable Cost - Fixed Cost. Thus Contribution is: Profit + Fixed Cost = Sales - Variable Cost. Therefore PV Ratio = (Contribution/Sales)X100. (This as a percentage of sales)
Break even point = Fixed cost / Contribution margin ratio Contribution margin ratio = (sales - variable cost ) / Sales
Formula for breakeven point = Fixed Cost / Contribution margin Contribution margin = Total Sales - variable cost SO using above mentioned formula break even sales can be found.
Breakeven point = Fixed Cost / Contribution margin Contribution margin = (Sales - Variable cost) / Sales
To determine the variable cost in a business scenario when given the fixed cost, you can subtract the fixed cost from the total cost. Variable costs are expenses that change based on the level of production or sales, while fixed costs remain constant regardless of production levels. By subtracting the fixed cost from the total cost, you can isolate the variable cost component.