The payments a business makes in order to produce their goods and services
Costs that do not change when the busines changes the amount it produces. E.g. raw materials. Do not change with level of output. E.g. Rent, Rates, Salary & Insurance
TOTAL COST = FIXED COST + VARIABLE COST
Cost that do not change when the business changes the amount it produces such a s eaw material. Very with output. E.g. Wages & Raw Materials
BREAK EVEN POINT & SAFETY MARGIN
Break Even Point
The break even point is when total cost = total revenue. The point where your not making a profit or loss.
Break Even Point = Fixed Costs
Margin Of Safety
Margin of safety is the difference between the actual level of sales and break even sales. It is the amount by which sales revenue may drop before losses begin.
Margin of Safety = Sales - Break Even Point