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20 Cards in this Set

  • Front
  • Back

'revenues' definition

the income/earnings of a business that their trading generates

profit=

total revenues - total costs

'fixed cost' defintion

costs which are not affected by the output of the business

'variable cost' defintion

costs which directly change depending on the level of output of the business

total costs =

variable costs + fixed costs

What do fixed costs look like on a money-output graph?

constant and horizontal

name some examples of fixed costs

rents, rates and management salaries

name some examples of variable costs

raw materials, fuel and components

if a company increases its output, what is likely to happen to the variable costs?

they will increase

what do variable costs look like on a money-output graph?

a straight line with a positive gradient starting at (0,0)

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.

Give an example if how variable costs change

The business may be able to negotiate lowers costs as they place larger orders

what helps to keep productions costs of each individual unit as low as possible?

producing on the largest scale possible

what is the risk of producing on a larger scale?

it may produce waste if the product doesn't sell.

what do we call costs that have fixed and variable elements to them?

semi-variable costs.

give an example of a semi-variable cost?

telephone costs

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.

Total costs =

fixed costs + variable costs

what does this formula assume?

that all costs of a business are either fixed or variable

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