Is this correct? Given the current information? What is the importance of distin

Question

Is this correct? Given the current information? What is the importance of distinguishing between variable and fixed cost 3. Cost Classification: The Lee's have provided you with the following costs and relevant information that are assumed for year 20XY. Classify the costs as variable costs or fixed costs. Explain the importance of distinguishing between variable and fixed costs. If business is expected to be steady from month to month, provide a monthly budget based on these figures. a. Advertising Fees $4,000 FIXED b, Labor= $400/month . One part-time employee will be hired to take care of packaging and shipping. This employee will be paid $10 per hour. He or she is estimated to work 40 hours total per month. FIXED Packaging Supplies $3,000 VARIABLE d. Office Supplies=$800 FIXED e. Phone and Internet Service $115/month FIXED f. Product Supplies $9,000 VARIABLE

Explanation / Answer

It is important to distinguish costs into fixed and variable in order to make decisions.

Fixed costs are those costs which are to be incurred irrespective of production and hence they should not be considered in making some decisions.....

Monthly budget Particulars Fixed Variable Cost Advertising fees 333.3333333 4000/12 Labor 400 Packaging Supplies 250 3000/12 Office Supplies 66.66666667 800/12 Phone and internet service 115 Product Supplies 750 9000/12 Shipping fees 1000 Conference Exhibitor fee 250 3000/12 Travel Expenses for conference 100 1200/12 Utilities for home workshop 105 2370 1000 Total Cost One month 2370 1000 3370 One year 28440 12000 40440

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