Chapter 18 Flashcards
Fixed costs
Costs that do not vary with the number of items produced (in the short run).
Variable costs
Costs that vary directly with the number of items sold or produced.
Total costs
Fixed costs plus variable costs.
Average costs
Total costs divided by number of units sold/produced; also called cost per unit.
Economies of scale
Factors that lead to a reduction in average costs as a business increases in size.
Diseconomies of scale
Factors that lead to an increase in average costs as a business increases in size,
Break-even output
The quantity that must be sold for total costs to equal total revenue.
Break-even chart
Graphs that show how costs and revenue of a product change at different
output levels - showing the B-E point
Contribution
Selling price minus variable cost per unit