Greetings,
In the topic of managerial accounting, it is important to understand the different types of costs related, which could be said to be fixed, mixed, and variable. This is crucial as it influences the organization and how decision-making and financial planning will occur. In this discussion, the types of costs will be discussed, and examples will be given for a better understanding based on my current job, which is a warehouse specialist, and I will explain how essential it is for managers (Lagoyska, 2023). The fixed costs are expenses that are not affected, or changes are not seen even depending on production or sales. This remains constant within a specific period, regardless of the level of activity that is present in the company. An example that can be said is the rent of the place where the warehouse is since the cost of the rent is fixed because it does not matter if the inventory level changes, the rent will remain the same. There is also the salary of full-time employees, their monthly salary is the same (Noreen et al, 2023). Variable cost is as the word itself mentions, it influences whether production or sales change, or rather if production increases or decreases, the cost will also change. An example is how the materials are packaged and how it varies in the quantity that will be prepared for shipment, which means that the more products are packaged, the higher the cost. The gasoline of the delivery truck varies since it depends on the destination where the product must be delivered. The mixed cost is the combination of the previous two, in which the level of activity varies in production and sales. Among these are the utility bills and the cost of maintenance (Wilson, 2014). Knowing this, managers need to budget and forecast and have better control of the cost and reduce unnecessary costs. For this, pricing decisions must be made to set a cost for a certain product. All this is to do a profitability analysis so that managers know how to cover expenses in general. An example of this is that in the warehouse it is crucial to have a good understanding of mixed costs, such as utility bills. In peak seasons, the variable cost will likely increase because the machines are consuming more energy than usual due to the use that is being given to them. Therefore, the manager must be aware of this and implement a plan to save energy to mitigate these effects.
WC: 340
Reference
Lagovska, O. (2023). Systematic Review of Behavioural Determinants Impacting Managerial Accounting Decision-Making: A Meta-Analysis Approach. International Journal of Behavior Studies in Organizations (JBSO), 10, 1–17. https://doi.org/10.32038/JBSO.2023.10.01
Noreen, E.W., Brewer, P.C. & Garrison, R.H. (2023). Managerial Accounting for Managers. 6th edition. McGraw-Hill + e-book + Connect + Learn
Willson, T. (2014). Finding Budget Flexibility – or Not: The Impact of Fixed and Variable Cost. Armed Forces Comptroller, 59(2), 31–34.
