Booklet 3 Flashcards
Examples of Variable costs.
Repairs Raw materials Advertisement Bills Wages
What’s a fixed cost?
Costs that stay the same regardless of changes in output
What is a variable cost?
Costs that change depending on the level of output
What is a Semi-Variable cost?
Vary with output but not in direct proportion.
What is the total cost equation?
Fixed cost + variable cost
F/C + V/C
What is economies of scale?
A reduction in costs gained by firms as they grow in scale and purchase in larger quantities
What is diseconomies of scale?
As a firm expands beyond its maximum efficient scale it must buy new machinery which increases costs.
What is a direct cost?
Costs which can be identified with a particular product or process.
Eg/ Raw Materials
What is an indirect cost?
Costs from the whole business. It is not possible to associate these costs directly with a particular product or process.
Eg/ Rent or Office staff salary
How do you calculate total variable cost?
Output x variable costs
What are the different types of costs?
Fixed Variable Semi-Variable Total Direct Indirect
What is revenue?
Revenue is the money a business makes from sales.
Number sold x Price
What is Profit?
The difference between revenue and costs.
Revenue - costs
Examples of Fixed Costs.
Rent/Mortgage Salary Loan Repayments Business rates Insurance
