Types of costs Flashcards
1
Q
What is a direct cost?
A
A cost that can be identified directly with each unit of output. (labour)
2
Q
What is an indirect cost?
A
A cost that cannot be identified directly with each unit of output. Overhead (rent)
3
Q
What are variable costs?
A
Costs that immediately change in proportion to the level of output or number of goods sold
4
Q
What are fixed costs?
A
Costs that do not immediately change in proportion to the level of output or goods sold. (rent)
5
Q
What are stepped costs?
A
Costs that are fixed up to a certain level of output, beyond which they increase to a higher level of fixed costs.
6
Q
What are semi-variable costs?
A
Costs where a part of it is fixed and a part of it is variable. (wages)
7
Q
What is margin cost?
A
The sum of the variable costs of producing one extra unit.
