Business 201 - Chapter 4

Question 1

Understanding the organizations cost base allows…?

Answer 1

mangers to better assess options in case of unexpected events

Question 2

Cost base

Answer 2

total cost associated with delivering the products/services to the market

Question 3

Main percentages to look at when assessing cost base

Answer 3

% of cost that are variable vs fixed

cost areas that make up a significant %

Question 4

Total Cost Base = ?

Answer 4

Variable Costs + Fixed Costs

Question 5

Variable Costs

Answer 5

(Direct Costs) Directly tied to the manufacturing of a product or delivery of a service

Question 6

Fixed Costs

Answer 6

(indirect) costs required to run business, not tied to manufacturing product

Question 7

The lower percentage of ____ costs the more control managers have to use cost reduction strategy

Answer 7

Fixed Costs

Question 8

When does a sales drop cause more damage?

Answer 8

With high fixed costs

Question 9

What is BEP

Answer 9

Break even point

level of sales required to cover all costs, zero profit

Question 10

BEP is seen as the minimal acceptable position for…?

Answer 10

The short term

Question 11

BEP based on units =

Answer 11

Fixed Costs/(selling price-variable cost)

Question 12

What is mark up

Answer 12

additional price added by the distributor on top of the manufacturers price to make a profit for the distributor