Most business firms position their products strategically as a way of matching market competition and further change the perception of consumers on their products (Avlonitis & Papastathopoulou, 2006). Marketers position their products differently in a bid to make their products more attractive and preferred by consumers from other similar brands. Manufacturing companies such as breakfast cereal companies position brands differently in terms of cost, packaging, quality, availability, and aimed customers among others (Masterson & Pickton, 2010). Examples may include Kellogg’s, Weetabix and Nestle cereals. Breakfast cereals from these three companies are different in quality, since they all taste differently. Moreover, their cost is slightly different and consumers have a variety from which to choose. In addition, the advertisement modes for the three brands are different. These products come in varied packaging and consumers may prefer one item to the others based on attractive packaging.
In accounting, cost is a term used to refer to decrease in the worth of an asset in the course of making profits or gain. Accountants divide cost into two broad groups, namely fixed costs and variable costs. Fixed costs are not subject to change with the change in sales or production capacities, since these volumes have no direct impact on fixed costs (Mc Eachern, 2005). Fixed costs take a long time before they increase or decrease and short-term change in business volumes has no impact on them. Examples of fixed assets are insurance premium, lease and rent.
Conversely, changes in sales and production volumes greatly influence variable costs. As the name hints, they will vary with change in sales capacity (Oliver, 2000). When sales volume increase, variable costs will also increase and decrease in sales volume will result in reduction of variable costs. Examples of variable costs comprise of direct labor and raw materials.
The government levies sales tax on products during their sale at the retail point. When a firm sells items worth $10 000 and the government imposes a sales tax of 5%, the firm will collect $10500 and will record the extra $500 as a liability, since it will be remitted to the government later. Conversely, if the firm purchases a car worth $50000 and sales tax is $2500, as a fixed cost as depreciation expense. This renders sales tax a fixed asset, since it is not included in gross profit calculations.
Avlonitis, G., & Papastathopoulou, P. (2006). Product and Services Management. London, LDN: Sage Publications Ltd.
McEachern, W. (2005). Economics with Infotrac: A Contemporary Introduction. Ohio, OH: Thomson Publication.
Oliver, L. (2000). The Management Toolbox: A Manager’s Guide to controlling Costs and Boosting Profits. New York, NY: AMA Publication.
Pickton, D., & Masterson, R. (2010). Marketing: An Introduction. London, LDN: Sage Publications Ltd.