Describe the principal costs incurred in the business that employs you today, or a prior business,...

Describe the principal costs incurred in the business that employs you today, or a prior business, and then categorize them as fixed, variable, or mixed costs. If the volume of activity increased 10%, what would happen, in general terms, to unit costs for that product or service? 100 words or more

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Various principal cost in plastic coated notebook manufacturing business are Rent of premises, salary of employees, Rent of machine, electricity charges, selling distribution & administration expenses, Direct material, Direct wages etc.

Assuming 10,000 unit of Coated notebook are produced in a year.

Cost	Type of Cost	Cost per unit	Total cost $
Rent of premises	Fixed Cost	3 $	30000
Rent of Machine	Mixed Cost (1000 $ fixed per annum)	.60 $	6000
Salary of employees	Fixed Cost	6 $	60000
Direct Material	Variable Cost	3 $	30000
Electricity Charges	Mixed Cost (500 $ Fixed Anuually)	.95 $	9500
Direct wages	Variable Cost	1.5 $	15000
Selling & Office expense	Variable Cost	1.5 $	15000
	Total	16.55

Total cost per unit = 16.55 $ per unit

In case if we increase the volume of activity by 10 % i.e. total production annually will be 10000+1000 = 11000 Units

Variable cost / unit	6 $
Fixed Cost / unit	8.18 $
Mixed Cost / Unit	1.54 $

Total Cost per unit = 15.72 $

Learning

1. Variable cost per unit does not changes with the change in level of activity in this case variable remain same at 6 $ per unit.

2. Fixed Cost per unit reduces as we increase the level of output/ activity in this case fixed cost has reduced from 9 $ to 8.18 $.

3. Mixed cost has both the component fixed as well as variable.

Therefore in general terms the cost of the product reduces when the level of output is increased.

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ekkarill92 answered 1 year ago

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