Purchase Solution

Which costs are reduced, fixed or variable?

Not what you're looking for?

Ask Custom Question

In an effort to reduce their total costs, many companies are now replacing paychecks with payroll cards, which are stored-value cards onto which the companies can download employees' wages and salaries electronically. If the only factor of production that a company varies in the short run is the number of hours worked by people on its payroll, would shifting from paychecks to payroll cards reduce the firm's total fixed costs or its total variable costs?

Purchase this Solution
Solution Summary

If a company replaces paychecks with stored-value cards, is it reducing its fixed costs or its variable costs? This solution gives the answer with a detailed explanation.

Solution Preview

It would reduce total fixed costs. The problem says that the number of hours is variable but the number of workers is not. This means that ...

Purchase this Solution
Free BrainMass Quizzes
Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

View More Free Quizzes
Related BrainMass Solutions

  • Bruggs & Strutton Company

    There will be no increase in fixed costs, but variable costs will be reduced by $0.54 per unit because of cheaper packaging. Determine the projected increase or decrease in profit from the order. D.

  • Variable and absorption costing?

    Format--under variable costing revenues are first reduced by all variable costs to arrive at an intermediate figure called contribution margin and then reduced by all fixed costs to arrive at a final net income figure.

  • CVP Analysis

    What dollar amount of sales must be achieved to reach the goal if fixed costs are $64,000? Problem #2 Thomas Company has total fixed costs of $360,000 and variable costs of $14 per unit.

  • Nichols Company, which manufactures a single product, is ope

    The follow unit costs relate to the manufacture of this product: Manufacturing: Direct materials $2.00 Direct labor 4.00 Variable overhead 1.00 Fixed overhead 1.80 Selling and administrative: Variable 3.00 Fixed 1.20 The company has 100

  • Make or Buy / Fixed Costs

    Note that costs which can be avoided should be included in total production costs. For instance, when fixed overhead costs or its portion can be reduced (avoided), it should be included in the production costs of the 'Make' section.

  • Cost Concepts: Balance of Fixed and Variable Costs

    An example of such organization will be software companies like Microsoft, Adobe or Mcafee that have high fixed costs but lower variable costs as most of the software companies have to spend on fixed costs like salary of employees for R&D, customer support

  • Accounting/Business Analysis/Financial Reporting

    In looking at this analysis, you will have to first have a clear understanding of Fixed & Variable (Discretionary) Cost: 1) Fixed cost associated with business or businesses are costs that are fixed and do not change whether or not any units are produced

  • Fixed Cost to Variable Cost

    Thus if the fixed costs are reduced then the operating risk reduces.

  • Convert fixed costs to variable costs

    Thus if the fixed costs are reduced then the operating risk reduces.

  • Pros/cons of Direct Labor as Variable Cost

    Fixed costs are those costs which remain the same irrespective of the production or sales level. Direct labor cost can be either fixed or variable. It can be fixed if the wages is given monthly and its not related to the quantity produced.

View More Related Solutions