Understanding Business Costs Quiz

Which of the following best describes a fixed cost?

• A cost that changes with the level of output

• A cost that remains the same regardless of output

• A cost that only occurs when production starts

• A cost that is directly linked to each unit produced

Which of the following is an example of a variable cost for a bakery?

• Monthly rent for the shop

• Wages paid to staff per loaf baked

• Annual business rates

• Insurance premium

Direct costs are best defined as:

• Costs that cannot be traced to a specific product

• Costs that are incurred before the business starts trading

• Costs that can be directly attributed to a specific product or service

• Costs that remain constant regardless of output

Which of the following is an indirect cost for a clothing manufacturer?

• Fabric used to make shirts

• Wages of workers sewing shirts

• Electricity used to light the office

• Thread used in production

Why are running costs important for a business?

• They determine the initial investment needed

• They affect the day-to-day profitability and cash flow

• They are only paid once at the start

• They are not included in financial planning

Which of the following is a start up cost for a new café?

• Monthly payment for coffee beans

• Purchase of coffee machines before opening

• Weekly wages for staff

• Utility bills

Which cost would NOT change if a business doubled its output?

• Cost of raw materials

• Wages paid per item produced

• Rent for the premises

• Packaging costs

Which of the following is a variable cost for a taxi company?

• Vehicle insurance

• Petrol used per journey

• Office rent

• Annual licence fee

Which of the following is a direct cost for a bakery?

• Flour used in baking bread

• Cleaning supplies for the shop

• Advertising expenses

• Manager’s salary

Which of the following is an example of an indirect cost for a business?

• Cost of raw materials

• Factory supervisor’s salary

• Wages for production workers

• Packaging for each product