Basics of Finance Flashcards

1
Q

Define costs

A

How much a firm has to pay to provide a good or service

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is meant by a fixed cost?

A

Costs which do not change (rent)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is meant by variable costs?

A

Costs which change with the level of output (raw materials)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is meant by indirect costs?

A

A cost which can’t directly be contributed to the product

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is a unit cost?

A

The price incurred by a company to produce, store and sell a particular product

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is a marginal cost?

A

The cost added by producing one additional unit of a product or service

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

How do you work out average costs?

A

Total cost/ units produced

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is meant by opportunity costs?

A

The loss of other alternatives when one alternative is chosen

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is a social cost?

A

The sum of private costs resulting from a transaction and the costs imposed on the consumers as a consequence of being exposed to the transaction for which they are not compensated or charged (the cost to the third party)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is a profit centre?

A

Separately identified as a part of a business responsible for its own revenues and costs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is a cost centre?

A

Part of a business where costs can be identified and allocated with ease

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

How might costs centres be allocated?

A

Product produced, department, location, capital equipment, physical size

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

State 3 advantages of cost centres

A

Allows to monitor performance, motivation, looks at suppliers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What are the disadvantages of a cost centre?

A

Issues collecting data, allocation of costs can impact performance, some costs cannot be controlled, can be unfair

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Give examples of a profit centre

A

Individual shops in a retail chain, a team or individual

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Give 3 advantages of a profit centre

A

Useful insights to where profits are being made, sets objectives, improved motivation

17
Q

Give 3 disadvantages of profit centres

A

Time consuming, difficulty allocating costs, may Perdue own objectives