Please, create a discussion post about the below topic and a respond to the 2 class mates discussion posts attached. Thanks you.Topic:
"There is no such thing as a fixed cost. All costs can be 'unfixed' given sufficient time." Do you agree? What is the implication of your answer for CVP analysis?
Instructions for main post (Around 200 words) "There is no such thing as a fixed cost. All costs can be 'unfixed' given sufficient time." Do you agree? What is the implication of your answer for CVP analysis? In your response, provide at least one example. Include appropriate citations. (Citations only needed for main post) Instructions for the two classmate responses (around 150 words each) Please, respond to the below two classmate main posts. (Please, the responses need to be a discussion, not an evaluation. You can agree with them and add/comment about their response.) Classmate post #1: Cheyenne Haley Cost-Volume-Profit (CVP) analysis is the analysis of the behavior and relationship that effects profit. This analysis estimates how much changes in a business’s costs, such as fixed and variable, sales volume, and price, that help managers make better decisions (Peavler, 2019). Additionally, the CVP analysis determines the break-even point for different sales volumes and cost structures, which also help in the decision-making processes that managers must make. CVP analysis can also help a company analyze existing new business opportunities for not only breakeven points, but also determine potential profitability that will help a business determine pricing on their products, how to market their products, and how to product products (Wiley, n.d.). There is question that there is no such thing as a fixed cost, and that all costs can be “unfixed” within a sufficient amount of time. A fixed time can be defined as an expense or cost that remains unchanged, even with an increase or decrease in the number of goods or services produced or sold (Kenton, 2018). Fixed costs include items like lease and rent payments, utilities, insurance, some salaries, and interest payments. The more a business has in fixed costs, the more revenue the business needs to breakeven. This means that the business needs to work even harder to produce and sell its products and services. Fixed costs occur regularly and rarely ever change, but it doesn’t necessarily mean they never change. I do believe that fixed costs don’t necessarily stay fixed forever as time goes by. Just because something is classified as a fixed cost, it doesn’t mean costs can’t be reduced or cut, making the fixed costs to change. Classmate post # 2: James Jobson Our text says, “Relevant range is the band or range of normal activity level or volume in which there is a specific relationship between the level of activity or volume and the cost in question.” (Datar & Rajan, 2014, p.33) This alternative definition makes a little more sense to me; it says the relevant range “suggest that within a certain range of cost driver activity that total fixed cost and per unit variable costs will remain that same! (or linear).” (00:00:36 - 00:00:49) Variable Cost Fixed Costs Per unit Stay the same within the relevant range Change within the relevant range Total Cost Change within the relevant range Stay the same within the relevant range (00:01:00 - 00:01:44) Within the relevant range total fixed cost are remain the same, whereas per unit fixed costs are variable. As an example, if the relevant range is 1 – 10 units of production with a total fixed cost of $1000, the total fixed cost will be $1000 regardless of the number of units produced within the relevant range. On the other hand, if 5 units are produced, the per unit fixed cost would be $200 per unit versus $100 per unit is all 10 units are produced within the relevant range. Additionally, within the relevant range, Variable costs are fixed per unit and variable in total. Using the same example, if the relevant range is 1 – 10 units of production with a variable cost of $10 per unit; the per unit variable cost with be $10 regardless of the number of units produced within the relevant range. On the other hand, if the number of units produced is 5, the total variable cost would be $50 versus $100 if all 10 units were produced.