Hi all,
If someone is able to explain me what means fix and variable operation?
Please show me it on example.
Are you referencing a specific AX field or a generic manufacturing approach? This is a split usually defined for overhead absorption from a costing perspective, so more information would prove useful!
Adam,
This is generic manufactoring.
Hmm how can I explain you it more detailed…
I have some product. This product contains operation details. The details which describe how should look the process.
Operation detail can be fix or variable.
Okay so you make something, and you have a setup cost for a machine, this is fixed (arguably) so no matter how many you make the setup cost is always 1 hour. You can then make 100 an hour.
On day 1 you manufacture for 10 hours and make 1000. At a cost of $100 per hour this is $1000. The setup was an hour and is $100.
On day 2 you manufacture for 3 hours and make 300. At a cost of $100 per hour this is $300. The setup was an hour and is $100.
The setup is fixed, no matter how many you make it is an hour and $100. Whilst the production time is variable and depends how many you make as you can make 100 an hour.
In production costing accountants like to attribute fixed and variable overheads to the cost of production, so a fixed cost could be the cost of the manufacturing plant.
Thank you. Now my understanding about this case is lighter.