Chapter 1 - Calculating The Cost Of Goods And Services

Question 1

When can a business make decisions about the selling price of an output ?

Answer 1

Once they know the cost of producing each unit

Question 2

What is the first step of calculating the costs of goods and services ?

Answer 2

Identify the unit of output

Question 3

What is the second step of calculating the costs of goods and services ?

Answer 3

Calculate the number of units of output for a particular time period.

This can be per day, week, month, quarter or year.

Question 4

What is the third step of calculating the costs of goods and services ?

Answer 4

Calculate the direct costs.

Once the units of output for a particular time period has been calculated you will need to know the prime costs ( total direct costs )

Question 5

What is the fourth step of calculating the costs of goods and services ?

Answer 5

Calculate the indirect costs ( AKA overheads ) of the production or service.

NOTE - this must also be calculated for the particular time period

Question 6

What is the fifth / final step of calculating the costs of goods and services ?

Answer 6

Add the total direct costs to the indirect costs and then divide them by the total number of output units