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Examples of discretionary costs are advertising, insurance premia, machine maintenance, and research & development expenditures. Discretionary fixed costs can be expensive. [4] In economics, the most commonly spoken about fixed costs are those that have to do with capital.
For example, you may be paying $2,000 every month in rent, mortgage or total cost of living. Some fixed expenses are also paid annually, bi-annually or quarterly.
Here’s an example. The ABC Company makes widgets. The company has fixed costs of $10,000 per month. Each widget costs the company $3.00 to make, and it sells each widget for $5.00.
Here are some examples that can help you better understand discretionary spending and some easy ways to reduce these non-essential expenditures. 1. Dining out at restaurants or ordering takeout.
A factory's costs are £10,600 during the busiest week, and £8,500 during the quietest week. The fixed cost is known to be £5,000, so the variable cost during the busy week is £5,600, and during the quiet week is £3,500.
The cost driver is a factor that creates or drives the cost of the activity. For example, the cost of the activity of bank tellers can be ascribed to each product by measuring how long each product's transactions (cost driver) take at the counter and then by measuring the number of each type of transaction.
Average fixed cost is the fixed cost per unit of output. As the total number of units of the good produced increases, the average fixed cost decreases because the same amount of fixed costs is being spread over a larger number of units of output. Average variable cost plus average fixed cost equals average total cost:
Cost-plus pricing is a pricing strategy by which the selling price of a product is determined by adding a specific fixed percentage (a "markup") to the product's unit cost. Essentially, the markup percentage is a method of generating a particular desired rate of return.