3.3 - Costs and Revenues

Question 1

What are costs?

Answer 1

The amount that has to be spent to purchase the resources that are necessary to produce or sell a product.

Question 2

What are the four types of costs?

Answer 2

Fixed and direct, fixed and indirect, variable and direct, variable and indirect.

Question 3

What are fixed costs?

Answer 3

Costs that a business has to pay regardless of how much it produces or sells(rent, interest, advertising, salaries, security etc).

refer to graphs on fixed costs vs output

Question 4

What are variable costs?

Answer 4

Costs that change in proportion to output(raw materials, piece-rate wages).

refer to graphs on variable costs vs output

Question 5

What are direct costs?

Answer 5

Costs specifically related to a project or product(consultancy costs, mortgage fees, etc)

Question 6

What are indirect costs?

Answer 6

Costs that cannot be traced to any particular product(rent, advertising)

Question 7

What is revenue?

Answer 7

Money coming in from product(goods or services) sales. Total revenue = product price x quantity. Average revenue = Total revenue/quantity. Price = Average revenue

Question 8

What are revenue streams?

Answer 8

Means other than trading activity used to generate income for the organisation.

Question 9

What are some examples of revenue streams?

Answer 9

Dividends(return on investment on investing in an organisation), interest or deposits, merchandise, donations, sponsorship deals, advertising revenue, subscriptions, royalties, rental income