WEEK 5 SMALL BIZ MNG DB Describe the difference between fixed costs and variable

Question

WEEK 5 SMALL BIZ MNG DB

Describe the difference between fixed costs and variable costs. (sometimes also fixed or variable expenses) What are some examples of fixed costs and variable costs specific to your industry (either in work or in a business idea). How does a business manage its cashflow differently in regards to planning for fixed costs versus variable costs?

PLEASE ANSWER THE FOLLOWING QUESTIONS IF ALL ANSWERED CORRECTLY WILL RATE 5 STARS NO SCREEN SHOTS OR IMAGES OF RESPONSE. PLEASE TYPE YOUR ANSWER OR UPLOAD DOCUMENT IF REQUIREMENTS MENTIONED ABOVE ARE NOT MET I WILL GIVE A NEGATIVE RATING

Explanation / Answer

Fixed costs remain fixed irrespective of the level of production. Variable costs vary according to the level of production.

For example, in the telecom industry, the rent paid for a site is fixed. However, the energy bill is variable as it depends on the units of electricity consumed.

Fixed costs are generally paid in the beginning of the year or month and then expensed out. So cash outflow for such costs is required at a particular time. Cash outflow for variable costs depends on the level of production and is planned accordingly.

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