Fixed and Variable Costs

 

 

 

 

Fixed and Variable Costs

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Fixed and variable cost refers to the cost of keeping a company running and making sales. For Kuwaiti company, the fixed costs are related to the company’s product, which must be paid irrespective of sales volume (Alhashel &Albader, 2020, pp. 310). Thus, whatever the company sells and whatever they have remaining will still have to pay their fixed costs.  Furthermore, they do not change even if the firm’s sales volumes or production levels rise. Examples of the fixed costs include the rent for the office space, marketing advertising, equipment leases and weekly payroll. The fixed cost is calculated by subtracting the total cost of production form the variable cost per unit multiplied by the units produced.

The variable costs include transportation, supplies and materials costs. The corporation will calculate its variable cots multiplying the total output with the variable cost per unit of output. In comparison, the variable costs are directly associated with the sales volume.

 

 

 

 

 

 

 

 

 

 

 

 

 

Reference List

Alhashel, B.S. and Albader, S.H., 2020. How do sovereign wealth funds pay their portfolio companies’ executives? Evidence from Kuwait. International Review of Economics & Finance, 67, pp.303-322.