3.2 Costs and Revenues Flashcards
1
Q
Costs
A
All the expenses to produce a product
2
Q
Variable Costs
A
costs that change as output changes (raw materials)
3
Q
Fixed Costs
A
does not vary with output (rent)
4
Q
Direct & Indirect
A
Direct
Expenses in the production of the good.
Eg: machine operator wage
Indirect
Overheads
Expenses not directly related to production
Eg: human resource manager salary
5
Q
Revenue
A
Income from selling a product
➔ TR (total revenues) = price x quantity sold
Revenue Stream
The income from a particular activity
6
Q
Profits
A
PROFITS
A company’s main objective is to maximise profits & survival
➔ TR-TC
7
Q
Total costs
A
TC = VC + FC
8
Q
Marginal costs
A
Extra cost of producing an extra unit of output
△T/△Q
9
Q
Cost per unit
A
TC/Q (AC) = VC/Q (AVC) + FC/Q (AFC)
