Examples of discretionary fixed costs include advertising employee training and

Examples of discretionary fixed costs include

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planning can result in avoidance of these costs if cutbacks become necessary or desirable. Examples of discretionary fixed costs include advertising, employee training, and so forth. Committed fixed costs relate to the desired long-run positioning of the firm; whereas, discretionary fixed costs have a short-term orientation. Committed fixed costs are important because they cannot be avoided in lean times; discretionary fixed costs can be altered with proper planning. Of course, a company should be careful to avoid incurring excessive committed fixed costs. In Paris or Online International programs taught by professors and professionals from all over the world BBA in Global Business MBA in International Management / International Marketing DBA in International Business / International Management MA in International Education MA in Cross-Cultural Communication MA in Foreign Languages Innovative – Practical – Flexible – Affordable Visit: Write: [email protected] Call: 01.42.77.20.66 Please click the advert
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Managerial and Cost Accounting 43 Cost-Volume-Profilt and Business Scalability Variable costs are also subject to adjustment. In the Digi-Key Corporation example, it was illustrated how such costs can vary based on quantities ordered. Perhaps it occurred to you that one might order and store large quantities of the diodes for use in future periods (after all, 1200 units at $.208 each > 3000 units at $0.08 each). In a subsequent chapter, you will learn how to calculate economic order quantities that take into account carrying and ordering costs in balancing these important considerations. Even direct labor cost can be subject to adjustment for overtime premiums, based on whether or not overtime is worked. It may or may not make sense to meet customer demand by ramping up production when overtime premiums kick in. Later in this book, you will learn how to perform incremental analysis for such decision tasks. The interplay between all of the different costs emphasizes the importance of good planning. The trick is to synchronize operations so that the benefits of each fixed cost are maximized, and variable cost patterns are established in the most economic position. All of this must be weighed against revenue opportunities; you must be able to sell what you produce. Some advanced managerial accounting courses present sophisticated linear programming models that take into account constraints and opportunities and project the ideal firm positioning. Those models are beyond the scope of an introductory class, but a number of simpler tools are available, and will be covered next. By 2020, wind could provide one-tenth of our planet’s electricity needs. Already today, SKF’s innovative know- how is crucial to running a large proportion of the world’s wind turbines.
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