Types Of Costs Flashcards
(22 cards)
What is the definition of a cost
Any money spent by the business
What is another term for costs
Expenditure
What are the two main types of costs
Start up costs
Running costs
What is the definition of a start up cost
Cost that need to be paid when setting up the business
How often does a start up cost need to be paid
Just once
Examples of a start up cost
Building
Office equipment
Original stock
Fixtures and fittings
Another word for a running cost
Operating costs
Definition of a running cost
Costs incurred in the day to day running of a business
How often are running costs paid
They are paid regularly throughout the life of the business eg monthly
Examples of a running cost
Hourly wages
Heating
Electricity
Advertising
Two types of running cost
Fixed costs
Variable costs
What is the definition of a fixed cost
A cost that doesn’t change with output
Another word for a fixed cost
Indirect cost
Example of a fixed cost
Salary
Rent
Equipment
Machinery
What is an overhead
A cost not directly involved in the production process. They must still be paid regardless of output .
Examples of overhead
Electricity bills
Eg. “Over your head “ lighting
What is the definition of a variable cost
These costs change with output eg the ore you produce the more you need
What is a variable cost also known as
A direct cost
Examples of a variable cost
Hourly wages
Raw materials
Formula for total variable cost
Variable cost for one product X output
Formula for average cost
Total cost divided by output
Formula for total cost
Fixed cost + variable cost
