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Different cost behaviour considerations, explained by our small business accountants in Melbourne

When making a financing decision, our small business accountants in Melbourne help businesses consider their fixed, variable and mixed costs. These must be considered with a relevant range. The relevant range is the normal range of production that can be expected for a particular product and company.

Fixed Costs
Fixed costs refer to the costs that remain the same regardless of the level of output by a business. Because of this, the cost per unit of a good decreases as the volume of production increases – this is known as economies of scale. An example of a fixed cost that our accountants for small business in Southbank come across regularly include rent or insurance.

Variable Costs
Variable costs refer to the costs that vary in proportion to the level of output by a business. Our accountants for small business in Melbourne include direct labour, direct materials and electricity as variable costs.

Mixed Costs
Mixed costs include both a fixed and a variable component, making it difficult to predict how the cost changes as production changes. This is unless the cost is separated into fixed and variable components, in which our Melbourne small business accountants can then segregate the costs.

For more information regarding the different cost behavior considerations for businesses, please contact our small business accountants in Melbourne today.

 
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