Marginal costing Flashcards
(13 cards)
What are the 3 types of costs?
Fixed
Variable
Semi-variable
What are fixed costs?
Costs that don’t change with output.
What are variable costs?
Costs that do change with output.
What are semi-variable costs?
A mix of fixed and variable costs.
£|
|
|________________> Fixed costs
|
|________________> Output level
What are examples of fixed costs?
Rent
Salaries
Cost of new machinery
What are examples of variable costs?
Raw materials
Hourly wages
Packaging costs
What are examples of semi-variable costs?
Electricity bills
Telephone bills
What are stepped fixed costs?
Costs that stay the same over a certain level of activity, but increase in steps when that level is exceeded.
What is the formula to calculate variable cost per unit from a graph?
Variable cost per unit = change in total cost/change in output
What is the definition of marginal cost?
The cost of producing one extra unit of output.
What is the format for a marginal costing statement?
Sales revenue
minus variable costs
equals contribution
minus fixed costs
equals profit
What is contribution?
The difference between the selling price of a product and its variable costs.
