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Essay text:
In essence, practical application of cost accounting requires understanding and management of costs at each stage of an organization.
The most basic among accounting terms are fixed costs which are defined as expenses that do not vary depending on production or sales levels, such as rent, property tax, insurance, or interest expense. "Fixed costs are the costs of the investment goods used by the firm, on the idea that these reflect a long-term commitment that can be recovered only by wearing them out in the production of goods and services for sale" (Drexel University, 2006, p.1).
The opposite of fixed costs are variable costs described as business expense that varies in proportion to the quantity of goods sold or manufactured, such as packaging materials or product components...
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