3.15 Costs, Revenue & Profit

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15 Terms

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Direct cost

cost clearly linked to production

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Indirect cost

costs not clearly linked to production

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Fixed costs (FC)

costs that don’t change regardless of level of output

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Variable costs (VC)

costs that do change w/ level of output

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Marginal costs

extra cost of producing 1 more unit

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Avg cost formula

total cost/total output

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As output, avg c__, to a point
> too much output = more s__ workers needed = more cost

cost, skilled

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Total costs (formula)

FC + VC

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What is this?

TC

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What is this?

VC

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What is this?

FC

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Revenue: what firms e__ from s__ of goods/services
Total revenue (TR) = $/unit x Qsold
> Avg revenue = total rev / total Qsold

earn, sale

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When does breakeven occur?

total revenue = TC

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Contribution formula

selling $ - VC

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Breakeven formula

FC/contribution