The y-intercept of a cost graph signifies the fixed costs incurred when no units are produced or sold.

To elaborate, the y-intercept is the value at which the cost graph intersects the y-axis. This intersection point represents the total costs incurred by a business, even when production or sales quantities are zero. These costs are classified as fixed costs because they remain constant, regardless of the output level. Common examples of fixed costs include rent, salaries for permanent staff, and insurance premiums.

Understanding the y-intercept is essential for businesses as it establishes their baseline expenses. Even if a company produces no goods, it must still cover these fixed costs to remain operational. For instance, if the y-intercept of a cost graph is £500, this indicates that the business incurs £500 in fixed costs, irrespective of the number of units produced or sold.

In cost graphs, the y-axis typically represents total costs, while the x-axis represents the number of units produced or sold. The slope of the graph illustrates variable costs, which fluctuate with production levels. By analyzing both the y-intercept and the slope, businesses can gain valuable insights into their cost structure, enabling them to make informed financial decisions.