Theme 2 key terms (Financial planning)

Question 1

fixed cost

Answer 1

cost doesnt change with output

Question 2

variable cost

Answer 2

cost that varies directly with output

Question 3

total cost

Answer 3

fixed cost + variable costs

Question 4

break even

Answer 4

output when total costs = total revenue

BE = fixed cost divided by contribution

Question 5

contribution

Answer 5

difference between variable cost and selling price per unit

Question 6

margin of safety

Answer 6

difference between actual and break even output

Question 7

overhead costs

Answer 7

costs which do not change with output such as rent