Fixed Cost, Variable Cost, Total Cost

Question 1

A MONETARY VALUATION OF EFFORT, MATERIAL, RESOURCES, TIME AND UTILITIES CONSUMED, RISK INCURRED
AND OPPORTUNITY FORGONE IN THE PRODUCTION AND DELIVERY AS A GOOD OR SERVICE.

Answer 1

Cost

Question 2

THE VALUE FORGONE IS CALLED

Answer 2

Cost

Question 3

ACCRUES AS THE SAID REWARD OF
THE ENTREPRENEUR.

Answer 3

Profit

Question 4

THE POSITIVE NET EFFECT OR DIFFERENCE BETWEEN REVENUE
AND COST CALLED

Answer 4

Profit

Question 5

EARN THRU THE SALE OF GOODS OR SERVICES

Answer 5

Revenue

Question 6

Referring to the interest, income, or expenses of an individual or business

Answer 6

Accrue

Question 7

looks into the concepts of
cost, short-run total and average cost, long-run cost along with economy scales.

Answer 7

The modern theory of cost in Economics

Question 8

states that the costs of a business highly determine its supply and spendings.

Answer 8

Theory of Cost Definition

Question 9

This is the cost per unit of output in the
short run. It’s calculated by dividing the short-run total cost by the quantity produced. Understanding short-run average costs is vital for pricing and output decisions in the short term.

Answer 9

Short-Run Average Cost

Question 10

This concept focuses on the total cost incurred by a business when some
factors of production are fixed in the short run (e.g., fixed capital, like a factory)

Answer 10

Short-Run Total Cost

Question 11

occur when a firm can produce goods at a lower average cost as it increases its level of production.

Answer 11

Economies of Scale

Question 12

In the long run, all factors of production are variable, meaning a firm can adjust its capital, labor, and other inputs.

Answer 12

Long-Run Cost

Question 13

ALSO KNOWN AS INDIRECT COST OR
OVERHEAD COST.

Answer 13

Fixed Cost

Question 14

THE COST OF A BUSINESS EXPENSE THAT
DOESN’T CHANGE EVEN WITH AN
INCREASE OR DECREASE IN THE NUMBER
OF GOODS AND SERVICES PRODUCED OR
SOLD

Answer 14

Fixed Cost

Question 15

Example of Fixed Cost:
C: RSPIDEL

Answer 15

1.RENT-THE COST OF LEASING OR OWNING A PRODUCTION
FACILITY OR OFFICE SPACE
2. SALARIES-SALARIES OF PERMANENT EMPLOYEES WHO ARE NOT
DIRECTLY TIED TO PRODUCTION LEVELS, SUCH AS ADMINISTRATIVE STAFF AND MANAGEMENT.
3.PROPERTY TAXES-TAXES ASSOCIATED WITH OWNING PROPERTY AND LAND.
4.INSURANCE-THE COST OF INSURING THE BUSINESS OR ITS ASSETS, WHICH TYPICALLY DOES NOT CHANGE WITH PRODUCTION LEVELS.
5. DEPRECIATION-ANNUAL COST ASSOCIATED WITH THE WEAR AND TEAR OF MACHINERY AND EQUIPMENT USED IN PRODUCTION.

Question 16

IT SHOWS THERE THAT THE FIXED COST
IS _______ ALL THE TIME,
HENCE IT HAS _________________.

Answer 16

CONSTANT, HORIZONTAL STRAIGHT LINE.

Question 17

Problem: A small manufacturing company wants to determine its fixed costs for a given month. The company’s total costs for the month are $10,000, and its variable costs, which change with production levels, are $5 per unit. The company produced 2,000 units during the month. The company wants to calculate its fixed costs for the month.

Fixed Costs = Total Costs - (Variable Costs per Unit x Number of Units)

Answer 17

GIVEN:
Total Costs = $10,000
Variable Costs per Unit = $5
Number of Units = 2,000

Solution:
Fixed Costs = $10,000- ($5 x 2,000)
Fixed Costs = $10,000-$10,000
Fixed Costs = $0

Question 18

ALSO KNOWN AS PRIME COST OR DIRECT COST.

Answer 18

Variable Cost

Question 19

ANY EXPENSES THAT CHANGE BASED
ON HOW MUCH A COMPANY PRODUCES OR SELLS.

Answer 19

Variable Cost

Question 20

IN VARIABLE COST, PRODUCTION OR ACTIVITY __________,
VARIABLE COST ALSO ___________.

DECREASES OR INCREASES?

Answer 20

Increases

Question 21

What kind of RELATIONSHIP does variable cost have? What curve?

Answer 21

DIRECT RELATIONSHIP, Upward Sloping to the RIGHT.

Question 22

Problem: A bakery produces bread, and they want to calculate their total variable cost for a specific batch of bread. The bakery’s variable cost per loaf of bread is 10 pesos, and they produced 500 loaves in the batch. Calculate the total variable cost in pesos.

Total Variable Cost = Variable Cost per Unit x Number of Units

Answer 22

Given:
Variable Cost per Loaf of Bread = 10 pesos
Number of Loaves Produced = 500

Solution:
Total Variable Cost = 10 pesos per loaf x 500 loaves
Total Variable Cost = 5,000

Question 23

all the cost incurred in producing
something or engaging in an activity this is a sum of fixed cost and variable cost.

Answer 23

Total Cost

Question 24

refers to the change in total cost when one additional unit is produced. It’s calculated by dividing the change in production costs by the change in quantity.

Answer 24

Marginal Cost

Question 25

It refers to the per-unit cost of production, in other words, it measures the amount of money that the business has to spend to produce each unit of output. It is calculated by dividing the total cost by the number of units produced.

Answer 25

Average Cost

Question 26

states that as a business increases the amount of a single input item (such as labour) while keeping other inputs constant (such as capital and land), the marginal productivity of that input decreases. In short, the more of a single input you add, the less effective it becomes in producing new output.

Answer 26

Law of Diminishing Returns

Question 27

sometimes referred to as the optimal level - is the ideal production rate, where the maximum amount of output per units of input is possible.

Answer 27

optimal result

Question 28

shows the maximum number of workers that should be hired if both total product and marginal returns are to be maximised.

Answer 28

point of maximum returns

Question 29

Law of Deminishing Returns consist of three stages

Answer 29

Stage of Increasing Returns Stage of Diminishing Returns Stage of Negative Returns

Question 30

as the quantity of one input rises while the quantity of others remains constant, the overall output or benefit increases at an increasing rate.

Answer 30

Stage of Increasing Returns

Question 31

as the quantity of one input rises while the quantity of others remains constant, the overall output or benefit increases at an increasing rate. As the quantity of input increases beyond the stage of increasing returns, the total output or benefit increases, although at a decreasing pace.

Answer 31

Stage of Diminishing Returns

Question 32

increasing the quantity of input begins to have a negative impact on total production. This is also known as the stage of diminishing marginal returns

Answer 32

Stage of Negative Returns

Question 33

Cost advantage companies gain from increasing production that becomes more efficient result in decrease in cost per unit. It provide larger companies with a competitive advantage over smaller ones (with lowering its per-unit costs)

Answer 33

Economies of Scale

Question 34

Kinds of Internal Economies of Scale

Answer 34

1. Technical Economies of Scale - investing in new machines 2. Purchasing Economies of Scale - buying in bulk 3. Managerial Economies of Scale - hiring professionals 4. Financial Economies of Scale - better chance to borrow fund 5. Marketing Economies of Scale - spread advertising and marketing

Question 35

when an increase in scale of production leads to a rise in average costs (cost per unit). If the firm produces more or less output, then the average cost per unit will be higher.

Answer 35

Diseconomies of scale

Question 36

Kinds of Internal Diseconomies of Scale

Answer 36

1. Communication Difficulties 2. Coordination Issues 3. Control Problems

Question 37

Kinds of External Disconomies of Scale

Answer 37

1. Pollution and traffic congestion 2. Competition driving up cost of factors of production

Question 38

also known as factors of production, are the resources and elements used to create goods or services.

Answer 38

INPUTS

Question 39

relationship between inputs and the output of a firm during the production of goods.

Answer 39

PRODUCTION FUNCTION

Question 40

are those that can’t easily be increased or decreased in a short period of time.

Answer 40

FIXED INPUTS

Question 41

are the goods or services that are produced as a result of combining these input. It represent the end products that a firm aims to maximize or optimize in the production process.

Answer 41

OUTPUTS

Question 42

are those that can easily be increased or decreased in a short period of time.

Answer 42

VARIABLE INPUTS

Question 43

TYPES OF PRODUCTION FUNCTION

Answer 43

1. SHORT RUN PRODUCTION where at least one of the inputs cannot be changed. Usually, you have the number of workers changing in the short-run while the capital remains fixed. 2. LONG RUN PRODUCTION where all input can change. As it is concerned with the long run, both labor and capital can change.