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Relationship between fixed cost average cost and marginal cost with graph?
Your fixed cost is going to be lower than you average cost and marginal cost as it is what you have to pay no matter what. If your business has a fixed cost of $800 (renting the building, insurance, and other things that don't change month to month) per month you and utilities, pay roll, and inventory to that (all things that change month to month) and average the amount out over, lets just say, a year this will allow you to subtract the average cost from the fixed cost to get the average marginal cost. You can deduce that the marginal cost month by month is the total minus the fixed. Draw your own graph. Another way of putting it.. Average Cost curve has a U shape and the Marginal Cost curve intersects the Average Cost curve at its minimum. Average Cost has U shape because when a firm starts producing initially, it experiences increasing returns - as the Fixed Costs are being spread over more levels of output and the combination of input factors reach optimum. This is where AC curve is falling. Then once the Short-run capacity constraints of the Fixed Inputs is reached, the firm begins to experience diminishing marginal returns to its variable inputs. In other words, the principle of diminishing returns is becoming more dominant. This is where AC curve is increasing. When MC is below AC, AC is falling because producing an extra output will pull down average costs. When MC is above AC, AC is rising, because producing an extra output will increase AC. Therefore MC always intercepts a U shaped AC curve at its minimum point.
Define high low method?
The high-low method is a technique used to separate fixed and variable costs within a mixed cost. By comparing the highest and lowest activity levels and the corresponding total costs, this method allows you to estimate the fixed and variable components of a cost.
Compare between the short run and long run costs using all categories of coststotal costtotal average costfixed costvariable costaverage fixed costaverage variable cost?
In the short run, all costs are considered variable except for fixed costs, which remain constant. Total cost in the short run can fluctuate due to changes in variable costs, affecting average total cost. In the long run, all costs become variable, allowing for more flexibility in adjusting production levels to optimize efficiency and minimize costs. Fixed costs become average fixed cost and average variable cost in the long run as they spread over more units of production.
What is job cost?
Job Costing is the art of breaking down the specific cost of a product or service that you provide. Fixed and variable cost play the most important role in this assessment. Fixed cost are overhead or cost that won't vary such as light bill, insurance, mortgage or rent, etc. Variable cost are fuel, oil, lumber, steel, etc. The change in these cost to make a certain product and the cost of the job will change dramatically. job costing also mean production against the customer order. Total cost recorded and reported the order of job. Unit cost is also reported and recorded the order of job.
How will calculate annuity method in depreciation?
To calculate depreciation using the annuity method, you divide the depreciable cost of the asset by the estimated useful life in periods. This will give you the annual depreciation expense for the asset. You can use formulas or online calculators to streamline the calculation process.
Is interest expense a fixed cost?
yes
Is mortgage payment a variable cost?
Mortgage payment can either be fixed or variable cost. A fixed cost means the interest rate charged on the loan will remain the same for the loan's entire term. A variable cost means the interest rate changes or decreases as time pass.
Is interest for a loan fixed or variable cost?
Interest for a loan is typically considered a variable cost because it can fluctuate based on the interest rate type. Fixed-rate loans have a consistent interest rate throughout the loan term, making the interest cost predictable. Conversely, variable-rate loans can change based on market conditions, leading to potentially higher or lower payments over time. Hence, whether interest is fixed or variable depends on the specific loan agreement.
Give another example of a fixed cost?
A fixed cost is one that does not change. At least for about a year or so. Good examples of fixed costs would be insurance, rent, periodic load payments, interest paid, fixed permanent employee salaries.
What is fixed and variable cost in an organisation?
A fixed cost is one an organization must pay whether or not it does any business. Rent is a fixed cost. Interest on a loan is a fixed cost. You either pay the interest on your loan or go bankrupt like General Motors. Other costs can be fixed or variable depending on the business. Inventory is variable. If sales are low, you keep a low inventory and do not keep much money tied up in stuff that is not selling. Labor can be a variable cost. With the right kind of business, you can have layoffs and when business picks up, hire more workers. Union contracts might make labor a fixed cost.
How much does fixed mortgage interest rates cost?
Fixed mortgage interest rates will vary according to lender, the credit worthiness of the borrower and the Bank of England rate. The rate remains fixed for a specified length of time, typically 2 to five years, and one may be required to pay an administration cost to secure this rate.
Is interest payments variable or fixed cost?
Interest payments are typically considered fixed costs because they do not fluctuate with the level of production or sales. Once a loan agreement is established, the interest rate and payment schedule are usually predetermined, leading to consistent, predictable payments over time. However, if interest rates are variable (as in the case of some adjustable-rate loans), the total interest expense can change, but the cost itself is still categorized as fixed in relation to the business's operational costs.
What is a fixed interest?
Fixed interest means that the interest on a loan or deposit does not change as the result of market fluctuations.
Is interest expense - variable or fixed?
Interest expense is generally considered a fixed cost because it remains constant regardless of the level of production or sales, as long as the interest rate and the principal amount of debt do not change. However, if a company has variable interest rates or uses a line of credit, the interest expense can fluctuate, making it partially variable. Overall, it is primarily categorized as fixed due to its predictable nature in most scenarios.
What is Fixed interest or treasury notes?
Treasury Note is a debt interest and carry a fixed coupon rate of interest. It means the interest rate is fixed on the treasury note and it is given to the holder.
Is the interest rate on this credit card variable or fixed?
The interest rate on this credit card is fixed.
When fixed cost treated as relevant cost?
Fixed cost become relevent cost when a particular decision affects the fixed cost of production. For Example: Before Decision fixed cost $100 After Decision Fixed Cost $120 so in this case fixed cost also becomes relevent for decision making.
