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    Fixed and variable costs : explained

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    What are some examples of fixed and variable costs from your workplace? Which costs may have both variable and fixed components? How can this be resolved for analysis purposes?

    What is the definition of operating leverage? How does operating leverage differ in manufacturing, service, merchandising, and e-commerce companies? How can operating leverage be used to increase a company's profitability? How do the four categories of ratios combine to give a full picture of a company's health?

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    I work with a jewelry manufacturer as a Quality Director. Some of the variable costs at my workplace include the cost of labor (hourly workers), cost of materials, and cost of raw materials. Some of fixed costs include the building and land costs, the costs associated with the machines. One cost that may have both a variable and fixed component is telephone expenses. We usually pay a fixed monthly fee for telephone expenses. However, if we make international calls (which we do because we have a lot of international vendors), then that is considered extra. So this cost has both a fixed component (the monthly bill) plus the variable component (extra amount for international calls). For analysis purposes, we can either consider this cost as fixed or variable depending on the range where we are doing the analysis. For example, if in my analysis I am purely interested in domestic sales, then I will consider it as a fixed cost. However, if in my analysis I am considering international procurement and sales, then I'll consider it as ...

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