Costs, scale of production and break-even analysis
10 flashcards to master Costs, scale of production and break-even analysis
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Define 'fixed costs' and provide an example.
Fixed costs are expenses that do not change with the level of production.
What are 'variable costs'?
Variable costs are expenses that change directly with the level of production. Examples are the cost of raw materials and direct labor; they increase as output increases.
Explain how to calculate 'total costs'.
Total costs are the sum of all fixed costs and variable costs. The formula is: Total Costs = Fixed Costs + Variable Costs.
Describe what 'average costs' represent.
Average costs are the total cost of production divided by the number of units produced. It shows the cost of producing one unit on average.
What is the difference between 'revenue' and 'profit'?
Revenue is the total income from sales before any costs are deducted. Profit is the remaining income after all costs (fixed and variable) have been subtracted from revenue.
Define 'break-even point' in terms of output.
The break-even point is the level of output where total revenue equals total costs. At this point, the business is making neither a profit nor a loss.
Give an example of 'economies of scale'.
Economies of scale are the cost advantages that a business can exploit by increasing their scale of production. An example is purchasing economies where buying in bulk leads to discounts.
What are 'diseconomies of scale'?
Diseconomies of scale are the cost disadvantages that a business experiences due to becoming too large. This could be due to communication problems or lack of motivation among workers.
Key Questions: Costs, scale of production and break-even analysis
Define 'fixed costs' and provide an example.
Fixed costs are expenses that do not change with the level of production.
What are 'variable costs'?
Variable costs are expenses that change directly with the level of production. Examples are the cost of raw materials and direct labor; they increase as output increases.
Describe what 'average costs' represent.
Average costs are the total cost of production divided by the number of units produced. It shows the cost of producing one unit on average.
What is the difference between 'revenue' and 'profit'?
Revenue is the total income from sales before any costs are deducted. Profit is the remaining income after all costs (fixed and variable) have been subtracted from revenue.
About Costs, scale of production and break-even analysis (4.2)
These 10 flashcards cover everything you need to know about Costs, scale of production and break-even analysis for your Cambridge IGCSE Business Studies (0450) exam. Each card is designed based on the official syllabus requirements.
What You'll Learn
- 8 Definitions - Key terms and their precise meanings that examiners expect
- 1 Key Concepts - Core ideas and principles from the 0450 syllabus
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After mastering Costs, scale of production and break-even analysis, explore these related topics:
- 4.1 Production of goods and services - 10 flashcards
- 4.3 Quality management - 9 flashcards
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