Fixed costs do not vary with output. No matter how many items are produced or sold, fixed costs remain the same.
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Give some examples of fixed costs...
Rent, rates, insurance, heating, and staff salaries.
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What are variable costs?
Variable costs vary with output. The more goods are produced are sold, the higher the variable costs.
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Give some examples of variable costs...
Raw materials, packaging, sales commission payments, wages paid to people who are hired for a specific production job.
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What are semi-variable costs?
Semi-variable costs have fixed and variable parts.
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Give an example of variable costs...
Telephone bills are a good example of semi variable costs. Businesses have to pay a fixed amount for their phone line and a variable amount depending on the phone calls they've made.
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What is revenue?
A business revenue is its income or earnings over a period of time.
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How do you calculate revenue?
revenue = quantity sold x average selling price
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What happens if a business reduces its selling price?
It can expect to sell more products.
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What happens if a business increases its selling price?
Its sales will be reduced.
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What is revenue expenditure?
Spending on items on a day-to-day or regular basis. These are the expenses incurred by a business that are shown on the income statement.
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What is capital expenditure?
This is used to buy capital items, which are assets which will stay in the business for a long time.
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Revenue Calculation
Revenue = Quantity Sold x Average Selling Price
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Total Costs Calcluation
Total costs = Fixed costs + variable costs
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Profit Calculation
Profit = revenue - total costs
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Other cards in this set
Card 2
Front
Give some examples of fixed costs...
Back
Rent, rates, insurance, heating, and staff salaries.
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