MAA103 Lecture Notes - Lecture 2: Contribution Margin, Fixed Cost, Variable Cost

• School: Deakin University
• Department: Business and Law
• Course: MAA103
• Professor: All

Document Summary

For a business to have profit their sales and revenues need to be greater than their costs. Busi(cid:374)ess"s (cid:374)eed to k(cid:374)o(cid:449) the (cid:272)osts of their ser(cid:448)i(cid:272)es a(cid:374)d produ(cid:272)ts so the(cid:455) (cid:272)a(cid:374) 1)fix selling prices to make money (earn profit) Direct costs: costs that can be readily traced to a particular product or service supplied eg: cost of all the ingredients that are used to make a cup of coffee. Indirect costs: costs that cant be easily traced to a particular product of service. Eg: for the electricity bill at deakin we can trace exactly where the electricity was used and how much. Product costs: costs that are an integral part of the product of service. Eg: purchase costs of product, cost of employee providing the service. Period costs: costs that are matched over a specific time period eg: salary of a supervisor , pay him over ti(cid:373)e a(cid:374)d he does(cid:374)"t dire(cid:272)tl(cid:455) affe(cid:272)t the produ(cid:272)tio(cid:374) of the goods.