ACCT 311- DISCUSSION 4 Name
Institutional Affiliation

ACCT 311- DISCUSSION 4
When looking at the costs of production it is crucial to understand the different costs that constitute the total production costs. I disagree with the statement that variable costs and fixed costs are the same thing. Fixed costs and variable costs are part of the total cost of production.

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FIXED COSTS
Fixed costs which sometimes are referred to as sunk costs are those costs, which remain the same despite the level of activity. Due to certain factors such as contractual agreements, these costs cannot be adjusted by an organization on a short term period. Even though fixed costs do not change very often, they can be controllable. For example, a rental cost is the same from one month to another, but the organization can control this cost by renting a smaller office space which is cheaper. These costs are also mandatory costs that an organization pays after a certain period of time, for example, monthly or on a yearly basis. …show more content…
This cost does not change and is not affected by the units produced. Another fixed cost is salaries, which are also dependent on the employees’ contractual agreement. The salaries do not change in a short term basis and is not dependant on the work or production. This cost is probably adjustable on an annual basis when there is an employee contractual review that results in a pay increment. Finally, factory insurance does not change often but depends on a yearly renewal