Claires Antique Assets - Case Study Example

Insurance and Taxes: Whether they are new or Antique assets every asset has to be taxed and if we are using these assets, for example, the antique car we are using we have to pay the insurance on that so that is also considered as a fixed cost which will probably incur. Taxes on antique items are a little bit lower as compared to new assets and the charges of insurance that are the Interest rate will probably be lower but the chances of running that asset are lower because the risk is high and it can lead towards ineffective productivity.

(Meigs & Meigs, 1997)In my opinion, it is not a good idea to uses Claire's assets to convert our fixed cost into the variable cost as there are many fixed costs that are not convertible very easily in Claire's antique assets. The reason for not following this strategy is that no business can run without having a certain amount of fixed cost and there are many costs in those assets that can increase our expenses. The other thing about not using these Antiques is that they involve a high-risk level which can ultimately affect our effectiveness and efficiency so therefore the use of these assets can be high risk.

Using these assets might be useful in the short term but it cannot be favorable in the long term and if it could be convertible into variable cost then ultimately our cost of production will increase and our cost per unit will eventually go high. (Hermanson & Edwards, 1992)This can be a good idea when we use these assets after their completion of their terms or after we depreciate our assets as according to their expected life when the salvage becomes zero or the expected life will become to an end by which we depreciated our assets.

After that we will not be charged taxes and insurance on our assets and that would be the best time to use the assets or consider them as a variable cost. As a smart manager, I will always try to make my company's assets most products which can lead to effective results and higher profits and that's why I used this technique to make our profits go higher and higher. (Warren, et al., 2001)