1.
Variable Cost:
The Variable cost is that cost which varies with increase or decrease in the level of production. The Variable cost of per unit remains same. Here, it can be said that variable cost has the positive relationship with output of production.
To identify: production line should be upgrade or not.
2.
Fixed Cost:
The Fixed cost is that cost which does not change with increase or decrease in the level of the production, but per unit fixed changes with change in the level production. Examples of the fixed cost are rent, wages and insurance.
To identify: The maximum one time equipment cost that company is will to pay replace instead of upgrade of equipment
3.
Minimum number of desk to be produces and sold if equipment is upgraded
4.
To identify: acceptability of alternatives
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Cost Accounting
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