MAA103 Lecture Notes - Lecture 2: Profit Margin, Variable Cost, Contribution Margin
15 Aug 2018
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Costs" are all expenses of running a business that are deducted from revenues earned, what remains is profit. Expenses include materials, equipment, space, time, energy, people and technology. Profit is the excess of revenue over expenses. Loss is the excess of expenses over revenue. It is essential for each business to know the cost of its services or products as accurately as possible in order to: Fix selling prices to make money (earn a profit) Car manufacturers in australia such as ford and holden have suffered financially, and/or shut down, because its costs are too high and the companies cannot compete with overseas car makers. Direct costs can be readily traced to a particular product made or service supplied e. g. ingredients of food. Indirect costs cannot be easily traced to a particular product or service e. g. electricity costs. Product costs are a necessary and integral part of a product or service e. g. purchases costs, wages.
