What type of Short term and long term variable and fixed costs should consider?
Short term variable
Variable costs are the cost which varies with production. If production increases the total cost increases due to rise in variable costs and vice versa. The most significant variable cost factor in the short term is cost of labour. The firm has to pay more attention on reduction to this charge. There are many ways to reduce labour expenses which contributed more in total expenses of the firm. It directly increases the cost of the parts which are used in vehicles. Following are ways to reduce the costs of the labour:
Shun Overtime
Prepare employee well from the start.
Jerk your outline.
Keep business consistent and on point
Contract out where you can.
Employ Technology
Labour cost added its portion of cost in total variable cost of production which ultimately affects the average variable and total fixed cost of the firm. More specifically variable costs accumulate the marginal cost. Labour is the direct and prime cost of production. Therefore, it is considered a vital role in charge of production (COM et.al, 2005, p. 142).
Long term variable Cost
Prepaid cost for all variable cost factors come under this head. It is an advance payment or variable expenses like advertising expense, prepaid rent, government fees, and advance payment for materials. Operating expenses come under this head.
Operating expenses are the expenditure which is connected to the action of a production, or to the process of a machine, part, and piece of tools or competence. They are the cost of capital used by an association just to uphold its survival. Equipment operating expenses may include:
Wages of workers
Advertising
Raw supplies
Rental fee or Lease expenditure
Workplace space rental fee
Equipment and tools permit or correspondent charge (Boundless, 2013).
Fixed Costs
Fixed cost is the cost which does not change due to change in production. It remains constant and fixed. Usually, overhead costs are included in fixed costs.
Overhead Costs: On financial statements, each product must include the costs of the following:
Direct material
Direct labour
Manufacturing (or factory) overhead
Well, firm should maintain its fixed cost which is incurring in below heads. It will reduce the total costs of production.
Material supervisor (forklift workers who shift supplies and units).
Group who set up the production tools to the essential provision.
Group who scrutinize goods as they are being shaped.
Group who perform safeguarding on the tools.
Group who clean the industrialized part.
Group who present documentation custody for the production route.
Industrial unit organization group.
Electrical energy, natural gas, water, and drain for working the production services and tools.
Workstation and communication structure for the developed purpose.
Revamp elements for the production tools and services.
Provisions for working the production method.
Reduction on the production tools and services.
Security and ecological costs (AC, 2013).
Unions Cost
Another head of fixed cost is cost of unions. It may tangible or intangible expense.
Tangible cost: Tangible costs are the expenses that are associated with real merchandise or examine.
Intangible cost: In adding to clear augmented expenses, there are those that affect spirits, originality and resiliency.
What cost should firm expect if it stays in South Korea?