RV wrote:
> The concept of variable and fixed cost must be defined in terms of periods of
> time (short run or long run) you are considering. Software is an abstraction
> for a product and as such can be considered intangible. But in order to
> deliver a product tangible (raw materials, equipment, supplies), intangibles
> must be taken into account (labor, energy costs, rent, etc). If you consider
> software as the final product only, then you might be right. Once you produce
> it, what is left to do? For a software producing company, the definition then
> must be expanded to include the cost of marketing, packaging and delivering
> the product since for software companies producing the software is not an
> altruistic event by itself, but it has the purpose of selling and or
> distributing it later. what happens if the product doesn't sell as well as
> expected?, They will produce less to adjusts the inventory for a while and
> the cost becomes variable. Of course if the employees kept their salary intact
> and the company keep paying insurance and electricity and equipment
> maintenance, those cost of producing the software remained fixed. But the fact
> is that there are indeed variable costs in producing software (the
> abstraction). I believe you are using either an old textbook or one that is
> based on conservative (strict definition) information to determine what is
> fixed and what is variable cost without considering how broad is the period of
> time (short run or long run) you are including in your definition.
>
> The following address includes some information that might help clarify the
> concept.
>
> http://hadm.sph.sc.edu/Courses/Econ/Cost/Cost.html
I quoted this whole post just in case JTK skips your but reads this reply. This
is the EXACT type of definition that I am referring to, and how I'm defining
software as variable cost.
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