CIE AS Business Classification of costs

A variable cost...

• Does not vary in proportion to sales

• will change in direct relation to changes in output

• will vary in relation to fixed costs

• will increase as overheads rise

Total costs mean

• all cash outflows

• set up costs less revenue

• Fixed plus variable costs

• Total profit less costs

An example of a variable cost for a garage would be

• oil for servicing cars

• salary of the garage manager

• advertising in a local newspaper

• rent of the garage

Which of the following statements are true...

• Fixed costs do not change

• Fixed costs do not change with output

• Fixed costs are always higher than variable costs

• Fixed costs only change if output falls

The fixed cost of the grocery store would be...(choose two)

• Hourly wages of shop staff

• Purchase of fruit and veg

• council tax on the store

• salary of the manager

Workers being paid rate for each unit they produce would be an example of

• fixed costs

• variable costs

• selling cost

• marketing cost

A direct cost is

• always a fixed cost

• an overhead

• a cost that can be identified with each unit of production and allocated to a cost centre

• a cost that can not be identified with each unit of production or allocated to a cost centre

An example of a direct cost for DBIS secondary would be (choose two)

• the cost of the security guard on the gate

• Salary of a teacher

• textbooks for the business studies department

• Salary of the head of school

An example of an indirect cost for DBIS would be (choose two)

• New laptops for secondary teachers

• Chartwells contract

• Head of Secondary

• Head of School

a direct cost is...

• always a fixed cost

• always a variable cost

• could be either fixed or variable