Chp 16

Question 1

Fixed cost definition

Answer 1

Fixed cost is cost that doesn’t change with output ex rent

Question 2

Fixed cost definition

Answer 2

Fixed cost is cost that doesn’t change with output ex rent

Question 3

Variable cost definition

Answer 3

Variable cost is cost that will change with output ex water bill

Question 4

Total cost definition

Answer 4

All thr variable and fixed cost of making the total output

Question 5

Average costs definition

Answer 5

The cost of making one unit of output

Question 6

Total cost formula

Answer 6

Fixed cost + variable cost

Question 7

Total cost formula

Answer 7

Fixed cost + variable cost

Question 8

Average costs formula

Answer 8

Total costs/output

Question 9

Where Costs data is used

Answer 9

It is used to decide if a business shoukd stop making a product or not ex setting price

Question 10

Economics of scale meaning

Answer 10

Means that there is a reduction in average costs due to an increase of sales of operations

Question 11

Explain financial economies

Answer 11

Loads of banks find it easier to large firms because they find them less risky so it’s easier for large firms to borrow money at lower interest rate

Question 12

Managerial economies

Answer 12

Larger firms are more able to hire specialist managers to help improve the quality of decision and make fewer mistakes

Question 13

Marketing economies

Answer 13

Larger firms can spread its marketing and advertising budget over a large output

Question 14

Purchasing economies

Answer 14

Larger firms can buy more raw materials in bulk at a higher trade discount since the suppliers offer discounts on large businesses

Question 15

Purchasing economies are also known as

Answer 15

Bulk buying economies

Question 16

Technical economies

Answer 16

Many big firms use flow of production to make their output this often uses the latest tech which is expensive and only big firms can afford it

Question 17

Flow production

Answer 17

A manufacturing process that is defined by the continues the flow of goods

Question 18

Flow production

Answer 18

A manufacturing process that is defined by the continues the flow of goods

Question 19

What does diseconomies of scale mean

Answer 19

There’s a factor that cause average costs to risenas the scale of operations increases(av cost rise)

Question 20

What is poor communication

Answer 20

The managers might not be able to communicate directly wirh employees if a firm becomes to big
This leads to more mistakes and bad decision making

Question 21

What is poor communication

Answer 21

The managers might not be able to communicate directly wirh employees if a firm becomes to big
This leads to more mistakes and bad decision making

Question 22

Lack of commitment from the employees

Answer 22

In a very big firm managers might not have day to day contact with the employees and they might not feel valued and demotivated
Can cause high labour turnover and poor good quality

Question 23

Lack of commitment from the employees

Answer 23

In a very big firm managers might not have day to day contact with the employees and they might not feel valued and demotivated
Can cause high labour turnover and poor good quality

Question 24

Weak coordination

Answer 24

The firms av costs may rise as a result of managers in different departments

Question 25

Break even analysis meaning

Answer 25

Revenue = total costs
Meaning that the firm is making neither a profit or loss this technique shows the relationship between Revenue costs

Question 26

Break even analysis meaning

Answer 26

Revenue = total costs
Meaning that the firm is making neither a profit or loss this technique shows the relationship between Revenue costs

Question 27

Margin of safety meaning

Answer 27

The diff between the current level of output and break even output

Question 28

Margin of safety meaning

Answer 28

The diff between the current level of output and break even output

Question 29

Margin of safety formula

Answer 29

Actual sales - break even output

Question 30

Margin of safety formula

Answer 30

Actual sales - break even output

Question 31

3 benefits of break even charts

Answer 31

1.Easy to construct/interpret
2.Can show the effect of a decision to change costs or revenue
3. Can help with other important business decisions like the location of a business

Question 32

3 limitations of break even charts

Answer 32

1. Ot assumes that all costs and revenues can be represented by straight lined
2. It’s not easy to separate costs into fixed and variable

Question 33

3 limitations of break even charts

Answer 33

1. Ot assumes that all costs and revenues can be represented by straight lined
2. It’s not easy to separate costs into fixed and variable