Question

define in your own words the following:

Fixed costs

Variable costs

Break-Even Volume

Sunk Costs

Direct Variable Costs

Indirect Variable Costs

Unique Value Proposition

What are the 5C’s of marketing. Explain their meaning in your own words

List the 4P’s of marketing. Explain their meaning in your own words.

Answer 1

Fixed costs: This is the cost which does not change for the period whether the company does production or not. This cost is not dependent on the level of production a company does. For example, the monthly rent of the office building is a fixed cost. Whether we produce goods and services in the firm or not, we have to incur this cost regularly.

Variable costs: This type of cost is dependent on the level of production which a company does. It rises when the firm experiences more demand and falls when the demand is less. For example, the cooking material cost in a pizza company will be dependent on the number of pizzas sold.

Break-Even Volume: The volume of production at which the total cost just equals the total volume. At this volume, the total profit becomes zero. In Breakeven,

Total cost = Total Revenue

(Variable cost per Unit) x Demand + Fixed cost = (Selling price per unit x Demand)

Sunk Costs: It is the cost which, once incurred by a firm, can not be recovered. This cost is not considered while making a decision about whether to invest in the project or not as it can not be recovered.