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Question 0

VARIABLE COSTS

Answer 0

These are costs that vary according to the number of units produced or sold.
They are incurred per unit and include items such as the cost of material, thread, buttons and
the wages of the assistant.

Costs that change depending on the level of activity, such as materials

Question 1

FIXED COSTS

Answer 1

These are costs that are incurred by the business, regardless of the quantity of units sold and/or produced. They are often annual or monthly costs, such as the shop rent, the wages of the manager and the administration costs.

Costs that remain constant and unchanging regardless of the level of activity such as rent

Question 2

CONTRIBUTION MARGIN

Answer 2

This is the dollar value achieved by deducting the variable costs per unit from the selling price per unit. This amount is used to cover the fixed costs.

The profit made per unit by calculating the difference between selling price and variable cost.

Question 3

BREAK EVEN POINT

Answer 3

The point at which sales revenues are equal to total costs.