Costs, Revenues, Wealth, and Capital Flashcards

Flashcards for vocabulary review based on lecture notes about costs, revenues, wealth, and capital.

Cost

An amount that has to be paid or given up in order to get something.

Cost (in Business)

In business, cost is usually a monetary valuation of effort, material, resources, time and utilities consumed, risks incurred, and opportunity forgone in production and delivery of a good or service.

Variable Costs

Expenses that fluctuate directly with a company's level of production or sales.

Direct Material Costs

Costs of materials that are used to produce the product.

Direct Labor Costs

The amount of wages paid to the direct labor involved in the production activities.

Direct Expenses

Expenses that vary in relation to the production volume, other than the direct material costs and direct labor costs.

Overhead Costs

The expenses a business incurs that aren't directly tied to producing a product or service.

Factory Overhead

The costs incurred during the manufacturing process, not including the costs of direct labor and direct materials.

Administration Overhead

Includes all the costs that are incurred in administering the business.

Selling Overhead

The total expense that is incurred in the promotional activities and the expenses relating to sales force.

Distribution Overhead

The total cost of shipping the items from the factory site to the customer sites.

Revenue

Refers to the total income a company or government earns from its operations over a specific period, typically a month, quarter, or year.

Revenue (Detailed)

The income generated from sale of goods or services, or any other use of capital or assets, associated with the main operations of an organization before any costs or expenses are deducted.

Marginal Cost

The cost of producing an additional unit of that product.

Marginal Revenue

The incremental revenue of selling an additional unit of that product.

Sunk Cost

The past cost of an equipment/asset.

Opportunity Cost

The forgone benefit that would have been derived by an option that was not chosen.

Wealth

Desirable things which satisfy human wants directly or indirectly.

Utility (as it relates to wealth)

The ability to satisfy some human want.

Scarcity (as it relates to wealth)

It is scarce in relation to demand.

Transferability (as it relates to wealth)

The ability to transfer from one person to another.

Personal or private wealth

Wealth which belongs to a certain person

Collectively owned wealth

Wealth owned by municipal boards or provincial and central government.

National wealth

Collective wealth of the nation.

International Wealth

Wealth that belongs to all the world nations.

Capital

In the form of money or assets, taken as a sign of the financial strength of an individual, organization, or nation, and assumed to be available for development or investment. It is used for the purpose of producing further wealth.

Capital (Accounting definition)

Money invested in a business to generate income.

Capital (Economics definition)

Factors of production that are used to create goods or services.

Price

The monetary amount a product or service is sold for; the cost a buyer pays to acquire something.

Value

The perceived usefulness, benefit, or worth of a product or service to a customer; what the customer gets in exchange for the price.

Income

The money an individual or business receives, usually through wages, salaries, profits, interest, or investments.

Margin

A small incremental change or difference, expressed as an absolute value or as a percentage of sales.

Marginal Cost (definition 2)

The additional cost of producing one more unit.

Marginal Benefit

The additional benefit of consuming or producing one more unit.

Utility (definition 2)

The satisfaction or happiness a consumer gets from consuming a good or service.

Total Utility

The overall satisfaction derived from consuming a certain quantity of a good.

Marginal Utility

The additional satisfaction gained from consuming one more unit of a good.

Law of Diminishing Marginal Utility

As a consumer increases their consumption of a good or service, the marginal utility (or satisfaction) they derive from each additional unit consumed decreases.

Expansion (in decision making)

Expanding production capacity or exploring new markets.

Replacement (in decision making)

Replacing an existing method with the optimum and least costly method, equipment, process, or location.

Closure (in decision making)

Closing down a factory or terminating projects.