Variable COst

[krishna besta]

This is Krishna.

I am in ambiguity to conclude the below mentioned point. 

Iam working in Restaurant Organization. We have to segargate for Cost Classification for Deefrezer Electricity Expenses. Deepreezer is Essential in Restaurant for freezing the goods in Cool Temparature.

Whether the Defreezer Electricity Charges as Considered as a Fixed Cost or Variable Cost.

[Sandeep Anand]

The question is not clear how you are incurring the electricity  charges. Is it on the basis of the Units consumed or are you paying as fixed charges? Fixed expenses are those expenses which will not change on the basis of production quantities and will change only on the basis of time. Say for example irrespective of the Unit consumed you have to pay a fixed electricity charges for a month.

 

Considering that you may classiffy defreezer electricity charges as fixed or variable.

AI Summary

Cost classification: electricity charges are fixed when time based, variable when tied to usage and metered consumption. Classification of deep-freezer electricity charges depends on the billing mechanism: if electricity is charged as a time-based or contractual monthly payment that does not change with usage, treat it as a fixed cost; if charges vary with units consumed or usage, treat it as a variable cost. The operative criterion for cost treatment is whether the expense changes with production activity or is determined by time-based billing.