key words - page 5 Flashcards
1
Q
Fixed Costs
A
These costs do not change when output changes, for example the rent of a premises must be paid even though the factory may be closed due to strike or other unforeseen circumstances. Similarly insurance on a firms vehicles must be paid regardless of mileage.
2
Q
Variable Costs
A
These are the costs that change when output changes, for example, wages and raw materials.
3
Q
Semi-Variable Costs
A
These consist of a fixed or standing charge plus an extra rate which varies according to use.
4
Q
Break Even Point
A
This is the level of sales at which a firm is breaking even, i.e. neither making profit or loss. Total revenue equals total costs.