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Managerial Accounting Emphasis on Fixed Costs

   

Added on  2019-10-01

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Name: Student Number: Word count: Name of the course: Tutor name: “MANAGERIAL ACCOUNTING”1 | P a g e
Managerial Accounting Emphasis on Fixed Costs_1

1.WHYDOESMANAGERPUTSUCHAGREATAMOUNTOFEMPHASISONCONTROLLINGFIXEDCOSTINTHEIRORGANIZATIONS?Fixed cost is the cost per unit depending on the output and decreases as the output cost increases.Fixed cost does not vary with production or the number of services has produced. Therefore, fixedcost is considered as the direct cost. On the other hand, fixed cost includes the cost due to rent,insurance or the costs incurred with the utilities for running the business, like salaries or expensesdue to promotion or advertising etc. Fixed cost can be changed with period of time [ CITATIONFaz93 \l 16393 ]. On the other hand variable cost by its name itself has been varied with thenumber of service that is rendered. This variable cost is directly related with the business activity.Whatever the business is did it is just changed with the business’s downturn or upturn. Thus themanager always uses to check the fixed cost first to maintain a constant cost per unit for thebusiness purpose. It is also important that with a very small decrease in sales there can be a highervalue of fixed costs in case of lowers earnings. The company thus tries to maintain the higher levelof the fixed costs which is more sensitive with the change of cost in production or servicesexpenses, for experiencing the fluctuation in case of earnings. For these facts discussed, managerskeep in mind the importance in controlling the fixed costs [ CITATION Dru17 \l 16393 ].2 | P a g e
Managerial Accounting Emphasis on Fixed Costs_2

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