12/7/2023 0 Comments Flexible expenses vs periodicPlease see back of your Card for its issuing bank. and may be used everywhere Visa credit cards are accepted. The Chime Visa® Credit Builder Card and the Chime Visa® Cash Rewards Card are issued by Stride Bank pursuant to a license from Visa U.S.A. and may be used everywhere Visa debit cards are accepted. or Stride Bank pursuant to a license from Visa U.S.A. The Chime Visa® Debit Card is issued by The Bancorp Bank, N.A. Here’s some examples of fixed expenses:īanking services provided by The Bancorp Bank, N.A. Examples of fixed expensesįixed expenses can be both basic necessities and recurring non-essential lifestyle items. Because of this, fixed expenses can make using certain budgeting methods, such as zero-based budgeting or the 50/20/30 rule, much easier to implement. Since these expenses are consistent, budgeting then becomes more predictable. Why they matter: The more fixed expenses you have in your budget, the better it is from a planning perspective. While fixed expenses typically remain the same within your budget, they can still change occasionally, like when you switch to a new cell phone provider or your landlord decides to raise your rent. If your car payment is $402.30, you can add that as a line item to your budget, right down to the cent. Because you know how much fixed expenses will be, they can be one of the easier items to add to your monthly budget. For example, a 10-year property lease can be considered a fixed cost over a nine-year period, but is a variable cost if the decision period extends past 10 years.A fixed expense is something that generally costs you the same amount of money every month. Over the long term, few costs can be considered fixed. See the cost-volume-profit analysis for more information. For example, a software development company has a fixed cost requirement of $500,000 per month and essentially no cost per unit sold, so revenues of $400,000 per month will generate a loss of $100,000, but revenues of $600,000 will generate a profit of $100,000. Of course, this concept only generates outsized profits after all fixed costs for a period have been offset by sales. In the short-term, there tend to be far fewer types of variable costs than fixed costs.Ī business is sometimes deliberately structured to have a higher proportion of fixed costs than variable costs, so that it generates more profit per unit produced. Examples of variable costs are direct materials, piece rate labor, and commissions. The reverse of fixed costs are variable costs, which vary with changes in the activity level of a business. This cost has a variable element, but is largely fixed. This is the cost of electricity, gas, phones, and so forth. This is a fixed compensation amount paid to employees, irrespective of their hours worked. This is a periodic charge for the use of real estate owned by a landlord. This is a tax charged to a business by the local government, which is based on the cost of its assets. This is only a fixed cost if a fixed interest rate was incorporated into the loan agreement. This is the cost of funds loaned to a business by a lender. This is a periodic charge under an insurance contract. This is the gradual charging to expense of the cost of a tangible asset (such as production equipment) over the useful life of the asset. This is the gradual charging to expense of the cost of an intangible asset (such as a purchased patent) over the useful life of the asset.ĭepreciation. Here are several examples of fixed costs:Īmortization. Conversely, a business with low fixed costs can continue to operate profitably even when its sales are low. It is of some importance to understand the extent and nature of the fixed costs in a business, since a high fixed-cost level requires a business to maintain a high revenue level in order to avoid generating losses. This type of cost tends to instead be associated with a period of time, such as a rent payment in exchange for a month of occupancy, or a salary payment in exchange for two weeks of services by an employee. A fixed cost is a cost that does not change over the short-term, even if a business experiences changes in its sales volume or other activity levels.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |