01 - Basics Flashcards
What is a direct cost?
A cost that can be traced to the production of a single unit ie, if a certain quantity of material is required to produce a unit, that cost of that quantity can be traced to that single unit
What are prime costs?
The total of all prime costs
What are indirect costs?
Costs that cannot be traced to a singular unit produced ie, rent, electricity or admin expenses
How do you work out the variable cost of a product?
High-low method
What is capital expenditure?
Where the items being paid for will last more then one year, for example: most assets
What is revenue expenditure?
When the item being purchased will last less than one year, for example: salaries or materials if they are used in under one year
What is the equation for the high-low method?
Difference in cost of each of highest vs lowest unit output / Difference in high vs lowest unit output
