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What are the types of costs?
1. set-up costs / running costs
2. direct / indirect costs
3. variable and fixed
Total costs equals
total fixed costs + total variable costs
(TFC + TVC)
Revenues are :
money coming into a business usually from the sale of goods/ services
What is profit?
The positive difference between revenues and costs
What is the difference between direct and indirect costs?
D.C : related to a specific product (outcome)
I.C: can not be clearly traced to the production or sale of any single product.
Classify the following as variable or fixed:
1. labor sewing garments in a garment factory
2. insurance
3. ingredients used to manufacture a food product
1. variable
2. fixed
3. variable
Classify the following as direct / indirect costs:
1. meals for patients
2. nurses' salaries
3. parking maintenance
1. direct
2. indirect
3. indirect
classify the following as variable or fixed costs:
1. direct materials
2. security
3. depreciation
1. variable
2. fixed
3. fixed
Classify the following as direct / indirect costs:
1. marketing expenditures
2. commission
3. Raw material
1. indirect
2. direct
3. direct
classify the following as set-up / running costs
1. installation of utilities
2. utilities
3. equipment
1. set-up
2. running
3. set-up
What changes in total when the level of production changes?
variable cost
what doesn't change when the level of production changes?
fixed costs
what doesn't change on a per unit basis when the level of production changes?
variable
calculate the revenue when;
You have 52 customers who buy your newly designed trainers – half of the customers buy the standard pairs for $24.99, but half choose to customize them, and pay $32.99 per pair.
$649.74 + $857.74 = $1,507.48
Calculate the revenue when :
You sell 34 printed tHshirts, which normally sell for £7, but the first 12 customers received a discount of 30%.
(12x4.90) + (22x7) = 58.80 + 154 = $212.80
Calculate the total costs when:
You rent a market stall, which costs you $50 for the day. You are selling candles, each candle cost you $2.2 to make. You have printed some banners and posters for promotion which cost you $14.7. At the end of the day, you have made 55 candles but sold 50.
TC = TFC + TVS
= 64.7 + 121
= $185.7
You made cupcakes. Each cupcake costs you $0.25 in ingredients and $0.15 for the clear packaging and ribbon. You sell each cupcake for $1.00. How much profit do you make if you sell 44 cupcakes?
((1.00 – (0.25+0.15)) x 44 = $26.40
You make and sell cases for iPads. You make cases for the Pad air and the iPad mini. It costs you $2.20 to make the case for the air and $2.00 to make the case for the mini. You also had to buy some equipment, which cost you $77. The website you sell them through charges you commission of 10% on all sales. In September you sold 56 iPad air cases for $12 each and 67 iPad mini cases for $10 each. How much profit did you make?
Revenue = (56 x 12) + (67 x 10) = 1,342
Costs = (56 x 2.20) + (67 x 2.00) + 77 + (1,342 x 0.10) = 123.20 + 134 + 77 + 134.20 = 468.40
Profit = 1,342 – 468.40 = $873.60
Ahmad sells freshly made sandwiches from his mobile food van, which he sells for $1.75. The table below shows how many sandwiches Ahmad sells in one week of trading (Ahmad does not work weekends).
Mon: 45 Tue : 43 Wed: 39 Thu: 48 Fri: 55
Calculate total revenue
230 * 1.75 = $402.5
Calculate average variable cost and on the basis of the following information :
output TFC TVC
0 60 0
1 50
2 90
3 180
4 300
− 50 45 60 75