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What is an example of a standby cost?
A standby cost is the cost of owning an asset that is available for business use even when it isn’t actually being used. The IRS uses this concept most often with equipment, vehicles, and machinery. Scenario You own a commercial generator that your business keeps on‑site in case of power outages. It only runs a few times a year, but it’s always ready for use. Annual costs you incur even when it sits idle Insurance: $300 Storage space allocation: $500 Preventive maintenance: $400 Depreciation: $2,000 Total standby cost: $3,200 per year These costs exist whether or not the generator is used, because the business keeps it available and ready.
Are Flexibility issues are those which impact the debt capacity that a firm should maintain?
The debt capacity that a firm can maintain is based on expected profits from products and services. Flexibility issues determine the capacity of debt that a firm can maintain.
Are those costs which firm has no control?
Costs which are affected by inflation
What categories of costs combine to create a firm's total cost?
A firm adds its fixed costs and capable costs to determine its todal cost at each level of output.
The costs of a firm that are paid directly in money are called?
Explicit costs!
What does it mean if a firm has excess capacity?
a firm has excess capacity if it produces below its efficient scale, whcih is the quantity at which total cost is a minimum.
Firm A one firm in a competitive industry faces higher costs of production As a result conusmers end up paying higher prices Discuss?
If a firm is having higher costs than another in the same industry, they will pass the costs to the consumer. That has to happen if the firm is supposed to make any profits.
How would you describe fully absorbed costs?
Fully absorbed costs refer to costs where the firm has allocated fixed manufacturing costs to products produced or divisions within the firm as required by generally accepted accounting principles.
What is a cost structure?
The expenses that a firm must take into account when manufacturing a product or providing a service. Types of cost structures include transaction costs, sunk costs, marginal costs and fixed costs. The cost structure of the firm is the ratio of fixed costs to variable costs.
Why are Fixed costs also called capacity costs?
Fixed costs are considered capacity costs because if a company expands, fixed costs will change. Additionally, if a company adds more resources, fixed costs will change.
A firm's opportunity costs of using resources provided by the firm's owners are called what?
equity financing
When a firm's revenues rise more quickly than its costs?
Hopefully, the firm makes a profit.
