3.3 types of costs Flashcards
1
Q
average cost
A
- the cost per unit of output
- average cost = total cost + quantity (output level)
2
Q
average revenue
A
- the value of sales received from customers per unit of a good or service sold
- average revenue = total revenue/ output sold
3
Q
cost
A
- the sum of money incurred by a business in the production process
- such as the cost of raw materials, wages, salaries…
4
Q
direct cost
A
- cost specifically assigned to the production of sale of a particular good or service
5
Q
fixed cost
A
- cost that do not vary with the level of output
- they exist even if there is no output
6
Q
overheads (aka indirect costs)
A
- costs that do not directly relate in the production or sale of a specific product
7
Q
price
A
- refers to the amount of money a product is sold for
- it is the sum paid by the customer to purchase a good or service
8
Q
profit
A
- exists if there is a positive difference between a firm’s total revenues and its total costs
- profit = total rev - total cost
9
Q
revenue
A
- the money that a business earns from the sale of goods and services
- revenue = unit price x quantity sold
10
Q
revenue stream
A
- money coming into a business from its various business activities
- such as a sponsorship deal, merchandise
11
Q
running cost
A
- the ongoing costs of operating the business
12
Q
set up costs
A
- the items of expenditure needed to start a business
13
Q
total costs
A
- the sum of all variable costs and all fixed cost of production
14
Q
total revenue
A
- the money coming into a business
- usually from the sale of good and or services
- total rev = price of product x quantity sold
15
Q
variable costs
A
- costs of production that change in proportion to the level of output
- such as raw materials and hourly wages of production workers
