Ch.16-Costs, scale of production and break-even analysis Flashcards
1
Q
Fixed cost
A
Costs that do not change with outpu
2
Q
Variable costs
A
Costs that change in direct proportion to output
3
Q
Total cost
A
All the variable and fixed costs of producing the total output
4
Q
Average costs
A
The cost of producing a single unit of output
5
Q
Economies of scale
A
The reduction in average costs as a result of increasing the scale of operations
6
Q
Diseconomies of scale
A
Factors that cause average costs to rise as the scale of operations increases
7
Q
Break-even
A
the level of output where revenue equals total costs; the business is making neither profit nor loss
8
Q
Margin of safety
A
The difference between the current level of output and break-even output