Costs, revenue and profit: Practice Questions

Which of the following best describes an indirect cost (overhead) for a car manufacturing plant?

A company produces custom t-shirts. The selling price is \( £15 \) per shirt. At an output level of \( 500 \) shirts, the total variable costs are \( £2,500 \) and total fixed costs are \( £3,000 \). If the company increases production to \( 600 \) shirts, and all other factors remain constant, what will be the new total profit?

A technology company sells a software subscription for \( £20 \) per month. The variable cost per subscriber is \( £4 \). The company currently spends \( £50,000 \) on fixed overheads and reports a monthly profit of \( £30,000 \). If the company reduces its price by \( 10\% \) to stimulate demand, how many additional subscribers are needed to maintain the exact same level of profit?

Which of the following is the best example of a direct cost for a firm that manufactures wooden furniture?

A boutique hotel has total monthly fixed costs of \( £12,000 \). The price per room per night is \( £150 \) and the variable cost per room is \( £30 \). If the hotel achieves an occupancy of \( 200 \) room-nights in a month, what is the resulting profit or loss?

A landscape gardening business charges its clients \( £40 \) per hour. If the business works for \( 120 \) hours in a month, calculate the total revenue generated.

A furniture manufacturer has total monthly costs of \( £25,000 \). If the variable cost per unit is \( £150 \) and the business produces \( 100 \) units, calculate the total fixed costs for the month.

Define the term fixed cost and provide one example relevant to a high street clothing retailer.