RO67 - 3.1 - Cost of producing the product

Which of the following is NOT a fixed cost for a business?

• Rent
• Salaries
• Raw materials
• Advertising

What is the main difference between fixed costs and variable costs?

• Fixed costs change with the number of products produced, while variable costs remain constant.
• Variable costs change with the number of products produced, while fixed costs remain constant.
• Fixed costs are always higher than variable costs.
• Variable costs are always higher than fixed costs.

According to the text, what is the purpose of calculating the cost per unit?

• To determine the total cost of production.
• To calculate the profit margin.
• To determine the minimum price needed to cover costs.
• To compare the costs of different products.

What is an example of a variable cost for a t-shirt business?

• Rent
• Salaries
• Raw materials
• Insurance

How can understanding fixed and variable costs help a business owner make informed decisions?

• By reducing production costs.
• By understanding total expenses and determining profit margins.
• By expanding the product line.
• By offering discounts and promotions.

What is the formula for calculating the fixed cost per unit?

• Total fixed cost divided by the number of units produced.
• Total variable cost divided by the number of units produced.
• Total cost divided by the number of units produced.
• Total income divided by the number of units produced.

How can businesses use the cost per unit to determine pricing strategy?

• By ignoring customer feedback.
• By understanding the minimum price needed to cover costs.
• By reducing production costs.
• By expanding the product line.

What is an example of a fixed cost for a business?

• Raw materials
• Packaging
• Rent
• Components

How can calculating the total cost help a business owner?

• By understanding the total expenses and determining profit margins.
• By reducing production costs.
• By expanding the product line.
• By offering discounts and promotions.

What is the purpose of calculating the variable cost per unit?

• To determine the total cost of production.
• To calculate the profit margin.
• To determine the minimum price needed to cover costs.
• To compare the costs of different products.