4.2 - costs, scale of production, break even

Question 1

cost

Answer 1

momentary value of all economic resources used in production of goods

Question 2

variable costs

Answer 2

costs which vary with the level of output e.g: cost of raw materials
higher output = higher variable cost

Question 3

fixed costs

Answer 3

costs that dont vary with the level of output e.g rent and salary

Question 4

average costs

Answer 4

total cost per units of output produced
obtained by total cost / total quantity of output

Question 5

break even

Answer 5

the level of output where the sales revenue is equal to the total cost
- that lvl of output where there is no profit or loss

Question 6

break even point (output)

Answer 6

the output needed to be produced and sold in order to start making profit
- fixed cost / selling price - variable cost

Question 7

revenue

Answer 7

amount of money received from the sale of good and service
- price x quantity

Question 8

break even sales revenue formula

Answer 8

break even point x selling price per unit

Question 9

disadvantage of break even analysis

Answer 9

• assumes that sales prices are constant at all levels of output
• assumes production and sales are the same
• breakeven charts may be time consuming to make
• it can only apply to a single product