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Based on the different types of costs, we can then review what current costs does Claire’s have that fits into each category. Then we will be better able to discuss whether or not it is a good idea to convert fixed costs to variable costs.
Variable costs, for a manufacturing company, are those costs that increase or decrease as production increases or decreases. If production increases, then variable costs will increase; if production decreases, variable costs will decrease. For Claire’s Antiques, examples of their variable costs would be manufacturing labor, raw materials, and manufacturing overhead...
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