unit 5

Created by

Constanza Parodi

Cards (26)

Total revenues = price of sale x quantity sold
Total cost = fixed costs + variable costs
What are fixed costs?
costs that dont change regardless of the amount you produce
What is an example of fixed costs?
rent
What are variable costs? 
costs that depend entirely on the amount you produce
Variable costs are volume driven
What is an example of varieble costs?
materials and direct labor
Is direct labor a fixed or variable cost?
variable
Breakeven is the point where total revenues equal total costs and profit is exactly zero
What is the formula for breakeven?
fixed costs/(price - variable cost)
Contribution margin = price - variable cost
Outsourcing is hiring an external company to do things for you
Outsourcing decreases fixed costs but increases variable costs
What is one disadvantage of outsourcing?
you lose control
When a company is big, they try to eliminate intermediaries so they are less likely to outsource
You should never outsource in aspects that are essential/key to the business
Outsourcing is the opposite of 'vertical integration' as it adds intermediaries instead of eliminating them
What are the 4 benefits of outsourcing?
reduces labor costs, cheaper administrative task, allows you to focus on your own employees and if an employee is absent, you dont need to find a replacement (the comapny is obligated to send them)
What are the 3 disadvantages of oursourcing?
you pay more, you have less control and external employees are less loyal
What is offshoring?
hiring another company located in a different country
Offshoring is an extension of outsourcing
Offshoring is a strategy implemented especially by medium and large companies
What is internalization?
when a company moves the manufacturing abroad
What is reshoring?
returning to the country of origin
What are other names for reshoring?
inshoring and backshoring
Variance analysis = comparing the actual achievement of the business during a period with the budget for the same time period