CA Foundation Exam > CA Foundation Videos > Business Economics for CA Foundation > Fixed & Variable Cost
Fixed & Variable Cost Video Lecture | Business Economics for CA Foundation
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FAQs on Fixed & Variable Cost Video Lecture - Business Economics for CA Foundation
| 1. What are fixed costs? |  |
Ans. Fixed costs are expenses that do not change with the level of production or sales. They are incurred regardless of the volume of output and remain constant over a certain period. Examples of fixed costs include rent, salaries, and insurance premiums.
| 2. What are variable costs? | |
Ans. Variable costs are expenses that change in direct proportion to the level of production or sales. These costs fluctuate depending on the volume of output. Examples of variable costs include direct labor, raw materials, and sales commissions.
| 3. How do fixed costs and variable costs differ? | |
Ans. Fixed costs and variable costs differ in terms of their behavior with changes in production or sales. Fixed costs remain constant regardless of the volume of output, while variable costs fluctuate proportionally with the level of production or sales. Fixed costs are incurred regardless of activity levels, while variable costs are directly related to activity levels.
| 4. How do fixed and variable costs impact a company's profitability? | |
Ans. Fixed costs can have a significant impact on a company's profitability as they must be covered by the revenue generated. If a company's sales decrease, fixed costs remain constant, which can lead to lower profits or even losses. On the other hand, variable costs directly affect the cost of producing goods or services, and managing them efficiently can contribute to improving profitability.
| 5. Can fixed costs become variable costs over time? | |
Ans. Yes, fixed costs can become variable costs over time. For example, a company may choose to outsource a function that was previously performed in-house, such as customer support or manufacturing. In this case, the fixed costs associated with maintaining an in-house department would be replaced by variable costs incurred when outsourcing to a third-party provider. Changes in business strategies or technological advancements can also lead to the transformation of fixed costs into variable costs.
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Dec 20, 2024 Last updated |
Video Description: Fixed & Variable Cost for CA Foundation 2024 is part of Business Economics for CA Foundation preparation.
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