4.04 Operating Costs

The point at which a business’s total sales equal total expenses; the business has not yet made a profit but has not incurred any losses

• Economies of scale

• Depreciation

• Breakeven point

• Get even point

A one-time purchase a business makes (e.g., land, building, equipment)

• Economies of scale

• Depreciation

• Breakeven point

• Capital expenditure

Cost savings created by increased levels of production

• Economies of scale

• Depreciation

• Breakeven point

• Capital expenditure

Loss of value

• Economies of scale

• Depreciation

• Breakeven point

• Capital expenditure

A pricing method in which the business adds a predetermined markup to the total cost of making the product

• Cost-based pricing

• Price-based costing

• Mixed costs

• Semi-fixed costs

A pricing method in which the business determines how much customers will pay for a product, then adjusts costs accordingly

• Cost-based pricing

• Price-based costing

• Mixed costs

• Semi-fixed costs

Expenses that are fixed until the company reaches a certain level of production, then become variable; also called semi-variable costs or semi-fixed costs

• Cost-based pricing

• Price-based costing

• Mixed costs

• Semi-fixed costs

Expenses that are fixed until the company reaches a certain level of production, then become variable; also called mixed costs or semi-variable costs

• Cost-based pricing

• Price-based costing

• Mixed costs

• Semi-fixed costs

Operating costs that do not increase or decrease with changes in production

• Operating costs

• Variable expenses

• Fixed expenses

• Total cost

The ongoing, day-to-day expenses of running a business that are not directly related to production

• Operating costs

• Variable expenses

• Fixed expenses

• Total cost