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.

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2
Q

Variable Costs

A

These are the costs that change when output changes, for example, wages and raw materials.

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3
Q

Semi-Variable Costs

A

These consist of a fixed or standing charge plus an extra rate which varies according to use.

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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.

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