Explain How an Organisation Can Cost a Product and Determine Its Price at Any Activity Level

Topics: Variable cost, Costs, Marginal cost Pages: 2 (651 words) Published: May 10, 2013
Explain how an organisation can cost a product and determine its price at any activity level The main costs and elements that a business needs to consider, taking into account the nature of these costs as well are: * Expense of buying vehicles or maintaining it

* Mortgage
* Business Rates
* Wages Extra / Wages
* Drawings
* Advertising
* Insurance
* Loan repayment interest
* Loan repayment capital
* Purchases / VAT on purchases
* VAT paid to C & E
Variable costs are those costs that vary depending on a company's production volume; they rise as production increases and fall as production decreases The variable costs in a business is rent advertising, insurance and office supplies, Purchases, VAT on purchases, VAT paid to C & E, Energy Usage, Distribution Costs and another would be Mortgage which is an exception if it on a tracker mortgage and you pay according to the current interest rate. Fixed Cost is a cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses that have to be paid by a company an example of a fixed cost would be a company's lease on a building. If a company has to pay £10,000 each month to cover the cost of the lease but does not manufacture anything during the month, the lease payment is still due in full. Other fixed costs are depreciation, insurance, interest, salaries, and wages. Semi- variable cost is costs that have both fixed and variable components. An example of the semi-variable cost is Cost of energy, such as electricity, is a good example as it is integral to production of goods and services. Another example is salaried employees who are also compensated by commissions. This group is paid on a fixed salary plus they are also rewarded based on the volume of sales they can generate, or, other forms of quantitative measures based on revenues to the firm. Semi-fixed cost are costs that are constant within a...
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