ch 29 and 30 Flashcards
What is average cost or unit cost?
the cost of producing one unit, calculated by dividing the total cost by the output
What are fixed costs?
a cost that does not change as a result of a change in output in the short run
What is profit?
profit = total revenue - total costs
isthe surpluse left after all costs have been dedcted from revenew
What is meant by the terms sales revenue?
the value of output sold in a particular time period
- it is calculated by price x quantity of output
What is meant by the term sales volume?
the quantity of output sold in a particular time period
the formula for sales volume:
* Sales revenue
—————-
price
What is meant to semi-variable cost?
a cost that consists of both fixed and variable elements
What is meant by total cost?
he entire cost of producing a given level of output
- total cost = fixed cost + variable costs
what is meant by total revenue?
the amount of money the business receives from selling output
what is meant by variable costs?
a cost that rises as output rises
what is the definition of break-even?
when a business generate just enough revenue to cover its total costs
what is a break-even chart?
-a graph containing the total cost ad total revenue lines, illustrating the break-even output
-The level of output a business needs to produce so that total costs are exactly the same as total revenue is called the break-even output.
what is the break-even output?
the output a business needs to produce so that its total revenue and total costs are the same
what is contribution?
Contribution is the difference between the price a product is sold for and the price it cost to produce it.
REMEMBER that contribution is only the money left over after taking away the variable costs. This money then CONTRIBUTES towards other fixed cost such as rent, insurance and other expenditures. Only after all other costs are paid does it then add towards the profits of a business.
What is the formula to work out contribution per unit?
contribution per unit = selling price - Variable cost
What is meant by total contribution?
Unit contribution can calculate the contribution on the sale of one unit. However sometime you may want to work out the contribution of a larger quantity such as a whole year’s output. This is called Total Contribution.
Total contribution is used when the contribution for more than one unit sold is required. There are two different formulas you may want to use to calculate total contribution.