Business costs & revenues Flashcards
What is fixed cost + examples?
A cost that does not change with an increase or decrease of output
Rent salaries
What is variable cost+ examples?
A cost that changes with output produced
Raw materials , wages
What is semi-Variable cost?
Part Fixed cost , Part variable cost
Starts fixed can increase with output
What is direct and indirect cost?
Easily attribute to a unit of output
Not easily attribute to a unit of output (Bills, Admin)
Total cost Formula
Fixed cost + Variable cost
What is revenue and formula?
Selling price x Quantity
Money generated from sale of goods and services
What is Profit and formula ?
Total Revenue - Total cost
Total contribution - Fixed cost
Money left after Total cost is subtracted from Total revenue
What is Break-even ?
Number output needed to be produced to balance(No loss or profit)
TR=TC
FC/CPU
What is contribution ?
Giving towards
Contributes to VC,FC, Profit
Contribution formula
Selling price- Variable cost
Total contribution Formula
(selling price- Variable cost)*quanity
What is MOS(Margin of Safety)?
Actual output above break-even output level
PROS + CONS of Break-even
Identifies PRofit or loss at different output
Sets Targets
Aids decision making
Predict change of variable cost
Ignores changes in VC or SP
Fixed cost may vary in Long run
Predict sales not actual sales
