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Chapter 5 Discussion 1

Chapter 5 Discussion 1

Q The goal of this discussion is for students to demonstrate an understanding of how costs behaviors will affect profitability and can be used in planning for and determining specific profit targets, and other decisions, such as pricing, product line, etc…. Keep in mind that this discussion question will help prepare you for future exams, so it is important that you understand the information and actively participate in discussions. To supplement your learning and enhance your understanding, you may also have to conduct research outside of course provided material. Discussion Question Requirements: 1. Your discussion question response must include a minimum of three paragraphs in length and is due no later than Thursday by 11:59 pm EST. o If the Thursday by 11:59 pm EST is missed, you will still be required to provide the initial post to participate in peer discussion and earn partial credit for the assignment. 2. Pick one peer’s post and review it. Then comment in no less than one paragraph why you found the information helpful, informative, etc. no later than Sunday by 11:59 pm EST. You must present new ideas and/or thoughts, merely stating that you agree/disagree is not enough to earn full points. 3. Students will not be able to see peers' postings before posting their initial post. Once you make your initial post, you are not permitted to edit. If edits are needed, you will need to reply to the original post and make the corrections there. 4. A paragraph is considered a minimum of 4-6 sentences. 5. Cite all sources - you must provide the exact link to the reference. Please keep in mind that citing sources does not mean you can copy and paste information from the source and use it as your own. You also cannot only change a few words from a source; all work must be in your own words. If copying/pasting is found or the submission is not in your own words, you will receive a zero, with no exceptions. This also includes commenting on peers' posts. 6. Use tables, if needed to make your posts directly into the discussion area. Do not post as an attachment. How would you define fixed and variable product costs? How are these costs used in determining the contribution margin of different products manufactured and sold? What relationship do you see between these cost behaviors as they relate to the volume of sales/production and profitability?

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Fixed costs are those costs that will not change regardless of production’s volume. Profit grows as sales grow because it is the difference between sales and total expenses. Example: Insurance – Premiums paid under an insurance contract Rent – Periodic expense for leasing a property Salaries – Fixed amount paid to workers or employees for their services, regardless of hours worked Fixed utilities – Cost of electricity, water, and gas generally used in office administration