Operating Costs 4.04

Which of the following are variable costs?

• Property Taxes

• Rent

• Employee Bonues

• Travel Expenses

When a business figures out a product’s total cost and then charges a pre-

determined markup, this is called____.

• Cost-plus pricing

• Promotion-based pricing

• Price-based costing

• Margin-based pricing

When business determines how much customers will pay for a certain product,

then figures out how to produce it for a cost that still leaves room for profit, this is called?

• Cost-based pricing

• Promotion-based Pricing

• Price-based costing

• Quality-based costing

Economies of scale refers to:

• A company spreading their fixed cost over more products so it accounts for less cost per product

• A company spreading their variable costs over more products so it accounts for less cost per product

• Reducing fixed costs by negotiating lower prices

When a company makes a one time purchase, like a building, furniture, or computers, this is considered a/an

• Capital Expenditure

• Operating Cost

• Promotional Cost

• Start-up Cost

Total Cost = Operating Costs + ?

• Promotion cost

• Direct Costs

• Indirect Costs

• Quality Costs

______ is the difference between how much it costs a company to make a product and the final selling price.

• Mark-up

• Cost

• Gross Profit

______ is when total costs = total sales

• Gross Profit

• Breakeven Point

• Mark-up

• Economies of scale

Fixed Costs/(Price per unit - variable costs) = Breakeven Point

So...if a company has 10,000 in fixed costs and charges $6 per unit, and each unit has $1 of variable costs...how many products do they have to sell to reach the breakeven point?

• 1,500

• 2,500

• 2,000

• 1,000

True or False: If you use Price-based costing, you must be careful to keep your operating costs low, while still maintaining quality.

• True

• False