Is depreciation a variable cost?
Understand the Problem
The question is asking whether depreciation should be classified as a variable cost, which is related to how costs behave in relation to changes in production volume. This involves understanding the nature of depreciation compared to fixed and variable costs.
Answer
Generally a fixed cost, except with the units of production method.
The final answer is that depreciation is generally a fixed cost, with the exception of the units of production method.
Answer for screen readers
The final answer is that depreciation is generally a fixed cost, with the exception of the units of production method.
More Information
Depreciation usually doesn't vary with production levels and is thus a fixed cost. However, with the units of production method, depreciation can vary based on the usage of the asset.
Tips
A common mistake is not recognizing that the method of calculating depreciation can affect whether it's considered a fixed or variable cost.
Sources
- Depreciation is a fixed cost or variable cost? - AccountingTools - accountingtools.com
- Variable Cost vs. Fixed Cost: What's the Difference? - Investopedia - investopedia.com
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