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John Moffat.
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Natasha1996
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What is the difference between General fixed cost and Specific fixed cost?
Is it correct that direct cost is a variable cost and indirect cost is fixed cost in nature?
And is it also correct that both fixed costs are relevant costs?
John Moffat
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General fixed costs are costs that are incurred whatever is produced. Specific fixed costs are only incurred if the specific product to which they relate is produced.
Direct costs are always variable. Indirect costs can be variable of fixed – this is all explained in my free lectures.
Fixed costs may or may not be relevant – it depends on what decision is being made and what the information is in the question. Most often they are not relevant because the total is not affected by the level of production.
Natasha1996
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