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    Antique fixed versus variable cost

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    One member of your team emailed you and stated that she believes Claire's Antiques should work to convert the fixed costs to variable costs. She wants to know if this is a good idea. Why or why not? If not, then when would it be a good idea?

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    Please find below my opinions on your idea.

    First, the behavior of costs - fixed or variable - depends on the cost object being observed and the time horizon. Second, in the long run, all costs become variable.

    Next, the behavior of costs affects the profitability of a business. Hence, a company must earn enough from selling its products and providing its services to recover its fixed costs. This ability ...

    Solution Summary

    This solution is comprised of an explanation of fixed and variable costs within the context of using Claire's Antiques as an example.