The Study of the Variable and Fixed Costs and its Impact on the Profitability of SME’s

Ariz B. Amistoso – SC: 412 / Rennier B. Cabrigas – SC: 398

ACCRESM

RATIONALE

Management practices are crucial in increasing the ratio of return on investment and these are
budgeting, forecasting, cost analysis and other financial management practices. During this time
of crisis, COVID-19 is still rampant, businesses needs to manage their costs in every possible
way in order to minimize losses and still reach improvements. However, SME’s are facing
difficulties to their development due to the lack of financial resources and management
experience. The purpose of this research is to show the impact of financial management practices
– study of variable costs and fixed costs – on the earning capability of SME’s and specifically
study the variable and fixed costs and its relationships on SME’s development and profitability.

PROBLEM STATEMENT

It seeks to answer the question of what is the relationship between the costs and profits.

IMPORTANCE OF THE STUDY

Costs are the driving force why businesses seek to earn a profit. It is important to learn the
impact of the costs in every peso earn. It is also for the benefit of the business because it will
affect the decision making of the manager if they will be able to assess how crucial costs are in
order to earn a profit.

METHODS

This research is a test hypothesis that will study the relationship between costs and profits and its
impact on business profitability. The researcher plans to gather both qualitative and quantitative
data through distributing questionnaires to the target population of SME’s. The researcher will
use random sampling in choosing samples for the analysis of data and for the conclusion.

LIMITATION

The major limitation related to the study is the plague that has been going on since 2019 which is
commonly called COVID-19. Due to these event, financial and non-financial resources will be
affected as well as the time resources. The study of variable and fixed costs will be conducted
only in a target population and samples will only be used in analysis and conclusion due to the
limitations of resources.

BIBLIOGRAPHY

Saqib, Muneer, Rao Abrar, Ahmad & Azhar Hussien, Ali (2017). Impact of Financial
Management Practices on SME’s Profitability with Moderating Role of Agency Cost, Vol. 9,
No. 1, pp. 23-30.