0
Still curious? Ask our experts.
Chat with our AI personalities
Rene
Lao
RafaAdd your answer:
Earn +20 pts
When other factors are constant what is the effect on profits of an increase in fixed costs Of a decrease in variable costs?
From the perspective of the income statement and profits, there is no difference between bucketing costs in variable or bucketing them in fixed. The operating profit line of the income statement takes both costs into account so that an increase in one with an offsetting decrease in another will have zero impact to profits. Issue related to bucketing of certain items are normally internal discussions for a business and relate to various scorecards or metrics of interdepartmental performance. In most businesses there are separate mgrs and depts responsible for variable cost and fixed costs so the debate over where to bucket certain items is driven by whose scorecard they fall onto and ideally costs should be bucketed internally onto the scorecard of the mgr/dept with the greatest ability to influence those costs.
Which ratio shows an organizations effectiveness in minimizing production costs?
There are two measures of production costs: total costs and marginal costs. The relevant ratio depends on which of these is being minimised.
Fixed costs are costs that?
Fixed costs are costs that donot vary with the quantity of the product produce and have no relation with volume of product like administration staff salary or building rent etc.
What are operating ratios?
Operating ratios are types of ratios that serve as gauges of a company's operating success (or profitability) for a given period of time. They are also known as profitability ratios.
Profits is calculated by subtracting costs from what?
Profit is calculated by subtracting costs from revenue.
