What key terms relate to unit costs in business?
- Products: A product is an item (goods) or a service that is offered by a business to satisfy the desire or need of a customer. It may be in physical or virtual form. Products cost the business to initially make or purchase but they are then sold to customer at a profit.
- Fixed costs: A fixed costs are business expenses that remains largely unchanged in relation to changes in business activity, output or sales. Examples include rent, depreciation, insurance and managerial salaries.
- Variable costs: Variable costs are business expenses that do change in proportion to business activity, output or sales. Examples include customer delivery, cost of good sold and packaging.
- Selling price: Selling prices is the final price of a product or service that a business charges a customer to buy the item or service. It is the agreed exchange value that the buyer will pay the seller.
- Gross profit margins: Gross profit margin is the amount of money remaining for the business after deducting the cost of goods sold from the revenue. Gross margin is often expressed as a percentage and calculated by dividing the gross profit $ by the revenue.
