COMM 1102 Lecture Notes - Lecture 3: Income Statement, Earnings Before Interest And Taxes, Fixed Cost
15 Oct 2018
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Document Summary
Some don"t change, regardless of what you do - fixed costs. Managers needs to know which costs are not going to change - the variable costs are manageable - they must distinguish between the costs. This allows them to budget, forecast and predict. In trying to predict the future, managers need to know which costs will change in the future. Discretionary - short-term, they have a choice on certain fixed costs - can be altered by current managerial decisions (ie. advertising and research and development) Companies choose to advertise (during the super bowl?) Once they"ve signed a contract, and it becomes committed. Committed - long-term, cannot be significantly reduced in the short-term (ie. depreciation on equipment and real estate taxes) The trend in many industries is toward greater fixed costs relative to variable costs. Machines are taking over mundane tasks, they are replaced by knowledge workers.
