Costs and Revenues Flashcards
Cost definition
The amount paid by a business for the materials/services used in the provision of its services or manufacturing of its goods. A firm will try to keep costs down without impacting on quality.
Two main type of costs?
Fixed and variable
Fixed cost definition
those costs that do not vary with the amount of business activity
Variable cost definition
those costs that do vary with the amount of business activity
Selling price definition
the amount that a customer pays in order to receive a good or service
Revenue can also be known as…
turnover and sales
Why is increasing profit important?
because business can then invest more, shareholders get more money back and business can expand/grow
Semi-Fixed cost definition
a cost that is fixed but can be increased if needed to
Direct costs definition
costs that directly associate with the product
Indirect costs definition
costs that do not directly associate with the product
What is the difference between the selling price and variable cost per unit known as?
the contribution towards covering the business’s fixed costs
Margin of safety definition
how much actual output is above the breakeven level of output
