Business Costs (GCSE)

Front

What are the two main types of costs in a business?

Back

Fixed costs and variable costs.

Front

What are variable costs?

Back

Costs that change in proportion to the amount of output produced or amount sold.

Front

Can you give examples of variable costs?

Back

Raw materials, employee wages based on production, energy used in production, and sales commissions.

Front

What are fixed costs?

Back

Costs that do not change in relation to how much output a business produces.

Front

Can you give examples of fixed costs?

Back

Rent, salaries, insurance, and advertising.

Front

What is an example of a semi-fixed cost?

Back

Costs associated with buying a new machine for increased production.

Front

What are direct costs?

Back

Costs that can be directly identified with the production of a good or service, like raw materials.

Front

What are indirect costs?

Back

Costs that cannot be matched against each product and need to be paid regardless of production, like rent.

Front

What is opportunity cost?

Back

The financial benefit forgone of the next best alternative use of money.

Front

How can opportunity cost be measured?

Back

By comparing the outcome of a decision with the benefits of the next best option.