Module 2

Question 1

What is a prime cost?

Answer 1

The sum of direct labour, material and direct expense

Question 2

What is contribution?

Answer 2

Contribution = Sales - Variable Cost

Question 3

What is a relevant cost?

Answer 3

A cost or saving which will arise as the result of a decision

Question 4

Name three sunk cost examples:

Answer 4

1. Depreciation
2. Development Cost
3. Material Costs
   (If these have been paid for and have no other use)

Question 5

What are avoidable costs?

Answer 5

Costs avoided as a consequence of not starting a new project