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MR Business Revision- Direct Costs Direct costs are costs that are directly involved in producing products. For example raw materials. Indirect Costs Indirect costs
and more educated counterparts. Losses to small business owners from minimum wage increases may be direct losses, such as cutting jobs or hours, or indirect losses-such
and General and Administrative (G&A) costs. Direct costs include things like labor, materials, and equipment. These costs can be charged to a specific "mini-budget."
costs and General and Administrative (G&A) costs. Direct costs include things like labor, materials, and equipment. These costs can be charged to a specific "mini-budget."
divide their costs into direct materials, direct labour and appropriate overhead under the guideline. It is also illustrate the innate principle-based characteristics.
Submitted by Spky on December 19, 2007
Category: Miscellaneous
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Business Revision-
Direct Costs
Direct costs are costs that are directly involved in producing products. For example raw materials.
Indirect Costs
Indirect costs are costs that do not directly go into the producing of products. For example overheads.
Fixed Costs
Fixed costs are those that are not dependant on the level of production. I.e. Telephone bills.
Variable Costs
Variable are costs that change dependant of the level of output. For example raw materials.
Break Even
The break even point is the point where a businesses outputs will just cover it's cost. Calculating the break even point: fixed costs/(selling price variable costs)
Internal Finance
Five sources:
Retained Profit (Putting profit back in)
Fixed Assets (Selling them)
Re-invest savings
External Finance
Short term (less than 1 year):
Overdraft
Personal Savings
Medium-term (1-5 years):
Bank loan
Lease assets instead of buying
Grants
Long-term(>5 years):
Mortgage
Issue more shares
Factors that affect choice:
Amount needed. A small amount of finance can be gained from overdraft, large from loan, etc.
Cost of finance. Load: High interest. Grant: Free!
Cash-flow
Cash flow is the flow of all money. Money flows in when products are sold. Money flows out when products are produced.
Liquidity: How well money flows around the business. I.e. If not enough money is available to buy materials, bad liquidity.
Poor cash flow can cause:
Bad motivation. Staff may not get paid on time, causing staff to get all angry.
Not able to produce more products.
Cash flow forecast
Cash flow...
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