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PPt On Cost And Business

Home > PowerPoint Slides > PPt On Cost And Business
Published in: Accountancy: Tax | Business Strategy
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This PPT is on various concepts of Cost and Business

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  1. A cost function specifies the cost C as a function of the number of items x. Thus, C(x) is the cost of x items, and has the form Cost = Variable cost+ Fixed cost => C(x) = mx + b (m = marginal cost b = fixed cost) If R(x) is the revenue (gross proceeds) from selling x items at a price of m each, then R is the linear function R(x) = mx and the selling price m can also be called the marginal revenue The profit (net proceeds) is what remains of the revenue when costs are subtracted. Profit= Revenue- Cost (Negative profit is Loss)
  2. Types of Costs e Fixed — • Variable — • Semi-Variable —ex: starts off fixed, gets established, and then there are changes • Direct - • Indirect — ex: the cost of "raw ingredients" to make the actual product that you sell
  3. Total Revenue Formula Total Revenue (TR) = Price (P) x Quantity (Q) Example • If a car dealer were to sell 100 BMW 5 Series Cars in 2011 for $200,000 each, there would be in revenue. 100 x 200,000. • Remember that revenue is very different to profit.
  4. Profit Formula • Profit is the amount remaining when all costs are subtracted from all revenues. • Profit = Total Revenue — Total Cost
  5. Total Cost Formula The total cost formula is used to derive the combined variable and fixed costs of a batch of goods or services. The formula is the average fixed cost per unit plus the average variable cost per unit, multiplied by the number of units. The calculation is: (Average fixed cost + Average variable cost) x Number of units = Total cost
  6. Example For example, a company is incurring $10,000 of fixed costs to produce 1,000 units (for an average fixed cost per unit of $10), and its variable cost per unit is $3. At the 1,000-unit production level, the total cost of the production is: ($10 Average fixed cost + $3 Average variable cost) x 1,000 Units = $13,000 Total cost

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