3.3 Costs and breakeven

Question 1

What is total revenue? And how to calculate it?

Answer 1

Money generated from the sale of output. Price x Quantity

Question 2

What are fixed costs? Give 2 examples.

Answer 2

Costs that do not vary with level of output.
*Rent
*Gas
*Electric
*Salaries
*Insurance
*Interest on a bank loan

Question 3

What are Variable costs? Give 2 examples.

Answer 3

Costs that change when output levels change.
*Raw materials
*Packaging
*Piece work staff
*Delivery costs
*Incentive and bonus

Question 4

What is piece work staff?

Answer 4

Form of employment where an employee receives payment based on the number of items produced.

Question 5

Define costs.

Answer 5

Expenses that must be met when setting up and running a business

Question 6

What does a fixed cost graph show?

Answer 6

X axis = Output
Y axis = Costs
Horizontal Line

Question 7

What does a variable cost graph show?

Answer 7

X axis = Output
Y axis = Costs
Diagonal Line

Question 8

What are total costs?

Answer 8

All fixed costs + All variable costs

Question 9

Is Rent fixed or variable?

Answer 9

Fixed

Question 10

Is Packaging fixed or variable?

Answer 10

variable

Question 11

Is raw materials fixed or variable?

Answer 11

variable

Question 12

Is Insurance fixed or variable?

Answer 12

fixed

Question 13

How to calculate average costs?

Answer 13

Average cost = Total cost/Quantity produced