costs Flashcards
what are costs in a business
expenses that must be paid while running the business
what are variable costs
costs that vary with the level of output
what are fixed costs
costs that remain constant regardless of the level of output
how is total cost calculated
total cost = fixed cost + total variable costs
how is total variable cost calculated
total variable cost = variable cost per unit × number of units
how is average cost calculated
average cost = total cost ÷ total quantity produced
what is total revenue
the money generated from the sale of outputs
what happens to fixed costs when output changes
they remain the same regardless of changes in output
how is total revenue calculated
total revenue = price × quantity
what is the significance of average cost
it represents the cost of producing one single unit
give two examples of fixed costs
rent and wages
what happens to variable costs when output increases
they increase as output increases
give two examples of variable costs
raw materials and packaging
what is the formula for total cost
total cost = fixed cost + total variable costs
