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hello, I have a technical question about management accounting, specifically what to include when calculating the...

hello, I have a technical question about management accounting, specifically what to include when calculating the fixed cost in order to find the break even point. let's say a company X wants to start a new project, with an operation life of "b years". usually, when calculating fixed costs, one should include everything that does not change with respect of the value of output/sales, such as rent, bills, insurance etc..
however, if the company X pays the full lease of "b years" BEFORE THE OPERATIONS COMMENCE, how would we include the amount paid in the calculation of the fixed costs ?

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Answer #1

Normally the fixed cost in order to break even consists of expenses like rent,bills,insurance,etc.

However,if company x starts a business with life of b years and the company pays the full lease payment before the operations commence the lease payments are deffered according to the period and the payments realting to only the relevant period will be taken into account.

For Eg-If the lease payments were 100000 for 10years.The amount of payment included in the current year would be 100000/10=10000.

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