E.2 Costs of a business

Question 1

What three costs need to be paid when running a business?

Answer 1

1. Start up costs
2. Fixed costs
3. Variable costs

Question 2

What is the equation for total costs?

Answer 2

Fixed costs + variable costs = total costs

Question 3

What is break even?

Answer 3

Where the total costs and the revenue are equal. It’s making neither a profit or a loss.

Question 4

What is the break even calculation?

Answer 4

Fixed costs/selling price – variable costs (contribution)