I have to discuss these questions for accounting. 1Explain the difference betwee
ID: 2459399 • Letter: I
Question
I have to discuss these questions for accounting.
1Explain the difference between variable cost, fixed cost and mixed cost. What causes changes in these costs? What makes them increase or decrease? Give three examples of each and explain how each example meets the criteria of fixed, variable and mixed.
2What production conditions are necessary for a company to use job order costing? What is the alternative to the use of a job order costing system? In what type of environment would this alternative costing system be found? Which system is utilized by the company where you are employer, were employed or would like to be employed?
thanks !
Explanation / Answer
Variable Costs - are those costs which changes with output. In other words, Variable costs are those costs which rise as production rises and fall as production falls. For Example: 1. Direct materials - Cost of raw material used for production. It changes as changes in production. 2. Direct labour -Cost of labour used for production. It changes as changes in production. 3. Sales Staff Commission - The commission paid to sales staff in percentage of sales. As sales incerases the commission incresaes and vice-a-versa. Fixed Cost - are those costs which does not change with an increase or decrease in production or sales. Fixed costs are those costs which are independent of any buisness activity. They have to incurr or paid whether there is any buisness activity or not. For Example: 1. Factory Rent 2. Property Tax 3. Insurance The above examples of costs does not change with the level of production. The company had to pay the above costs, whether there is any level of activity. Mixed Costs - A mixed cost is those cost which contains both the element of fixed costs and variable costs. These are the cost which are fixed upto some level of production and after that it will increase upto some level of production. For Examples: 1. Salaries paid 2.. Supervisor Salary 3. Power Expenses The above cost ae mixed cost since, supervisor can supervise a limited number of workers and after that another supervisor is required to supervise extra wokers. For Example, a supervisor vcan supervise maximum 10 worker as per the policy of company and after that another supervisor is hired for another 10 workers. You can ask one question at one time. For answer of another question, please ask it again.