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Describe Committed fixed costs
Committed fixed costs are those fixed costs that arise from the possession of
1. Plant, building and equipment (for example, depreciation, rent, taxes, insurance premium etc.) or
2. A basic organization (for example salaries of staff). These costs remain unaffected by any short term changes in the volume of production. Any reduction in committed fixed costs under normal activities of the concern would have adverse on the concern’s long term objectives. Such costs cannot be controlled.
WHAT IS PRIME COST?
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Cause Company is planning to invest in a machine with a useful life of five years and no salvage value. The machine is expected to produce cash flow from operations of $20,000 in e
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