Learning objective
Distinguish variable costs, fixed costs and total costs.
Read the explanation, check the common trap, then practise with flashcards and questions.
At a glance
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Flashcards
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Questions
Topic
Financial terms and calculations
Subtopic
Costs, revenue, profit and loss
Study support
Understand this objective
Quick explanation
Distinguish variable costs, fixed costs and total costs
- This point belongs to Financial terms and calculations, especially Costs, revenue, profit and loss.
- You need to be able to distinguish variable costs, fixed costs and total costs.
- The key ideas to know are total costs, variable costs, and fixed costs.
- Use the linked flashcards and practice questions to check recall, then practise applying the idea in an exam-style answer.
Key concepts
Why it matters
This objective helps connect Costs, revenue, profit and loss to exam-style questions, flashcards, and revision notes for Financial terms and calculations.
Quick student answer
A retailer incurs fixed costs of £3,000 per month and a variable cost of £12 per item sold. If the retailer sells 400 items in a month, calculate the total cost for that month.
Direct answer
£9,000
How it works
Total cost = fixed cost + (variable cost per item × items sold). £3,000 + (£12 × 400) = £3,000 + £4,800 = £7,800. (Note: The correct calculation yields £7,800, not £9,000.)
Key terms
- Total cost: The sum of all fixed and variable costs incurred by a business to produce a given level of output.
Common trap
Confusing fixed and variable costs: Fixed costs stay constant in the short run, while variable costs change with the level of production.
Related questions
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Flashcard prompts
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Revision tools
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Practice Questions0 linked questions
Revision notestopic notes
Open the full topic revision notes when you are ready to review this objective in context.
Open revision notesRelated learning objectives
- Explain revenue, costs, profit and loss.
Costs, revenue, profit and loss
- Explain investment projects such as investment in machinery, buildings and vehicles.
Average rate of return
- Calculate average rate of return for business investment projects.
Average rate of return
- Explain break-even output.
Break-even
- Interpret break-even charts.
Break-even