3.2 Costs and revenues

Question 1

Fixed costs

Answer 1

• costs that do not vary with the level of output
• exist even there is no output
• i.e rent

Question 2

Direct costs

Answer 2

• costs specifically attributed to the production or sale of a particular good or service
• can be traced back to the product and/or to a cost centre

Question 3

Cost

Answer 3

the sum of money incurred by a business in the production process

Question 4

indirect costs (overheads)

Answer 4

costs that do not directly link to the production or sale of a specific product, e.g. rent, wages

Question 5

Price

Answer 5

amount of money a product is sold for

Question 6

Revenue

Answer 6

• the money that a business collects from the sale of it goods and services
• unit price x quantity sold

Question 7

Revenue stream

Answer 7

refers to the money coming into a business from its various business activities

Question 8

Total costs

Answer 8

variable costs + fixed costs

Question 9

Variable cost

Answer 9

costs of production that change in proportion to the level of output, e.g. raw materials

Question 10

Two types of costs

Answer 10

set-up costs

running costs