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Hi Sir, Can I ask what kind of variable cost and fixed cost will incur if the manufacturing part is outsourced? so the company is responsible for selling it only.
Apart from the amount paid to the external supplier (which is obviously variable), it depends what other related costs the company has. For example, if they have to pay for the delivery of the goods then this is probably a variable cost. If they have a department to receive the goods, then the cost of this department will probably be a fixed cost.
Obviously in the exam it depends on the information given in the question and the wording of the question.
How about the retailer’s salesperson salary is that considered as variable or fixed cost?
1. the amount paid to external supplier is that mean direct material cost?
2. delivery goods=variable distribution cost?Am I correct? Thanks
The salespersons salary will be a fixed cost (unless they are paid commission based on they sales).
Amount paid to external supplier is only a direct material cost if it is the raw materials they are buying from the supplier.
Distribution costs are costs of delivering to customers, not costs of paying for delivery from suppliers.
These questions are hardly likely to be relevant for Paper PM – they are more relevant to Paper MA.
How about the amount paid to outsourced suppliers (the final products)?
OK Sir Just for understanding purposes
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