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John Moffat.
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Imran.Sajjad
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Any Fixed costs whether it is direct fixed cost or specific fixed cost both are included in the calculation of Breakeven?
John Moffat
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It depends on the question.
I am guessing that you are referring to a question where there were two products which had both general fixed overheads and specific fixed overheads, and you were asked for breakeven when just one of the two products was being produced. In that case we would use all of the fixed costs for that one product (all the general fixed costs plus the specific fixed costs for that product). We would not include the specific fixed costs for the product that was not being produced because if it is not being produced there would not be any specific fixed costs.
Imran.Sajjad
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That’s the right question and I need your word if I say it this way…
If we are making only one product then the general fixed costs of all the products include but specific fixed cost include only to the product we are making should be involved in calculations because although if we don’t make the second product the general fixed cost will stay the same for the period but the specific fixed cost is specifically incurred only if we produce that second product. Therefore, it shouldn’t be included in calculations.
John Moffat
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That is correct.
Imran.Sajjad
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