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20 Cards in this Set
- Front
- Back
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'revenues' definition |
the income/earnings of a business that their trading generates |
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profit= |
total revenues - total costs |
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'fixed cost' defintion |
costs which are not affected by the output of the business |
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'variable cost' defintion |
costs which directly change depending on the level of output of the business |
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total costs = |
variable costs + fixed costs |
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What do fixed costs look like on a money-output graph? |
constant and horizontal |
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name some examples of fixed costs |
rents, rates and management salaries |
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name some examples of variable costs |
raw materials, fuel and components |
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if a company increases its output, what is likely to happen to the variable costs? |
they will increase |
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what do variable costs look like on a money-output graph? |
a straight line with a positive gradient starting at (0,0) |
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is the straight line a fair representation of variable costs? |
no, it is done for simplicity. In truth, the variable costs continually change depending on prices expenditures. |
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Give an example if how variable costs change |
The business may be able to negotiate lowers costs as they place larger orders |
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what helps to keep productions costs of each individual unit as low as possible? |
producing on the largest scale possible |
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what is the risk of producing on a larger scale? |
it may produce waste if the product doesn't sell. |
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what do we call costs that have fixed and variable elements to them? |
semi-variable costs. |
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give an example of a semi-variable cost? |
telephone costs |
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why is this semi-variable? |
because most businesses pay a fixed cost for the phone rental every quarter year but also have to pay per phone call on top of this which often varies with the output of the business. |
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Total costs = |
fixed costs + variable costs |
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what does this formula assume? |
that all costs of a business are either fixed or variable |
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if a business has high fixed costs, what might it have to do to make a profit? |
have large levels of production/output to spread the fixed costs over more products |
