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Is worker wages are an example of marginal cost variable cost fixed cost or total cost?
Worker wages are typically considered a variable cost because they can change based on the level of production. As a company increases or decreases its output, the total wages paid to workers may rise or fall accordingly. However, if wages are fixed through contracts or salaries regardless of production levels, they can be classified as a fixed cost. Overall, the classification depends on the nature of the employment arrangement.
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Difference between marginal cost accounting statements and absorption cost accounting statement?
marginal costing considers only direct) materials,labour,expenses and variable factory overheads excluding fixed factory overheads but absorption considers (direct) materials ,labour,expenses,variable and fixed factory overheads.
Under marginal costing is fixed cost calculated from the number of units sold?
Under marginal costing, fixed costs are not calculated based on the number of units sold but are treated as period costs that are expensed in full in the period incurred. Marginal costing focuses on variable costs associated with production, allowing for analysis of contribution margin per unit. Fixed costs remain constant regardless of sales volume and do not affect the marginal cost of producing additional units. Therefore, the emphasis is on variable costs in decision-making rather than fixed costs tied to sales volume.
Why average cost increase when marginal cost is increasing?
Marginal cost = derivative of (Total cost/Quantity) Where Total cost = fixed cost + variable cost Marginal cost = derivative (Variable cost/Quantity) (by definition, fixed costs do not vary with quantity produced) Average cost = Total cost/Quantity The rate of change of average cost is equivalent to its derivative. Thus, AC' = derivative(Total cost/Quantity) => derivative (Variable cost/Quantity) = MC. So, when MC is increasing, AC' is increasing. That is, when marginal cost increases, the rate of change of average cost must increase, so average cost is always increasing when marginal cost is increasing.
Examples of variable cost and fixed cost?
Direct labor and direct material is example of variable cost which increase with each increase of unit. Factory rent is example of fixed cost which remains fixed even in change in number of units produced.
Are selling expenses fixed or variable cost?
selling expenses is a mixed costs. it is a mixture of both fixed and variable components. for example, in selling expenses in a retail shop; fixed costs are the employees salary. while variable cost will be their commission or bonus of the sale.
Example of the law of diminishing marginal productivity?
The law of diminishing marginal product states that as a firm uses more of a variable resource with a fixed resource and fixed technology, the marginal product of the variable resource will fall. From related site.
What is diminishing marginal productivity explain with example?
the law diminishinf mean fixed cost and variable cost
Do fixed and variable costs affect short-run marginal cost?
Fixed costs do not affect short-run marginal cost because they are just that- fixed. They are not dependent on quantity when it changes and does not vary directly with the level of output. Variable costs, however, do affect short-run marginal costs.
What are the four measures of cost?
marginal cost, total cost, variable, and fixed cost
What is the relationship between marginal productivity and marginal cost?
The marginal product curve is 'n' shaped because of the law of diminishing returns. As you add more units of a variable factor, at first, the marginal product rises, (this is because the fixed factor is under-utilised, so adding more units of the variable factor will increase the output from each additional unit). But after a certain point, the marginal product begins to fall, as the fixed factor input becomes diluted amongst workers and so you get less from each additional unit of the variable factor. For an example, re-read the above paragraph and replace the word variable factor with labour and fixed factor with capital. The marginal cost curve is the inverse of the marginal product curve - hence it is shaped like a 'u' or a 'Nike tick'. This is because if your marginal product is high - then your marginal costs are low. For example, if a firm must pay electricity for the time it takes to produce a unit, if the firm can produce the unit quicker (i.e. has a high marginal product) then the cost of electricity will be lower. Hence the inverse relationship between marginal cost and marginal product.
What is the relationship between Average variable cost Average fixed cost and marginal cost?
we can subtract the AVC and we will get the MC
If fixed cost do not change then the marginal cost?
Contrast to what we would normally think, changes in fixed costs do not affect marginal cost. For example, if a product costs $10 to produce, and the fixed cost goes up to $25, then marginal cost stays the same.
Why marginal costing method not Suitable to be used by manufacturer for external financial reporting and tax purpose?
I think..... In marginal costing method only variable cost is considered as product cost and fixed cost is not considered as product cost. But in reality product cost include fixed and variable, thus both variable and fixed costs should be considered while allocating cost. Marginal costing is used for inside reporting and absorption costing is used for outsider to clarify the real cost of product........ Am i right? Please confirm it
Difference between marginal cost accounting statements and absorption cost accounting statement?
marginal costing considers only direct) materials,labour,expenses and variable factory overheads excluding fixed factory overheads but absorption considers (direct) materials ,labour,expenses,variable and fixed factory overheads.
A cell phone bill is usually an example of which of these?
Fixed expense plus a variable
Under marginal costing is fixed cost calculated from the number of units sold?
Under marginal costing, fixed costs are not calculated based on the number of units sold but are treated as period costs that are expensed in full in the period incurred. Marginal costing focuses on variable costs associated with production, allowing for analysis of contribution margin per unit. Fixed costs remain constant regardless of sales volume and do not affect the marginal cost of producing additional units. Therefore, the emphasis is on variable costs in decision-making rather than fixed costs tied to sales volume.
Why average cost increase when marginal cost is increasing?
Marginal cost = derivative of (Total cost/Quantity) Where Total cost = fixed cost + variable cost Marginal cost = derivative (Variable cost/Quantity) (by definition, fixed costs do not vary with quantity produced) Average cost = Total cost/Quantity The rate of change of average cost is equivalent to its derivative. Thus, AC' = derivative(Total cost/Quantity) => derivative (Variable cost/Quantity) = MC. So, when MC is increasing, AC' is increasing. That is, when marginal cost increases, the rate of change of average cost must increase, so average cost is always increasing when marginal cost is increasing.
