3.3 Costs and Revenues Flashcards
2 categories of costs
- fixed costs and variable costs
- direct costs and indirect costs/ overheads
variable cost
vary with output
(impacted directly by production)
fixed cost
don’t vary with output or activity
ex of variable costs
materials
packaging
delivery
commission & piece-rate wage
cleaning
graphing variable costs
total variable costs on different quantities of output
examples of fixed costs
salaries and fixed wages
rent and mortgage
machines
fixtures
insurance
graphing fixed costs
straight line of fixed
total costs
total variable costs + fixed costs
semi-variable costs
have variable and fixed elements
varies with output (number of units produced) yet is fixed as it is required for business to operate
ie. electricity
direct costs
costs precisely traceable to a specific cost objects, which may be a product, a service or a department
only attributed to a single part of the business
indirect/ overhead costs
costs used in multiple areas or activities of the business and are not traceable to a specific cost object
revenue
income that a business earns from selling goods and services
total revenue formula
price * quantity
revenue streams
income a business generates for a particular activity
a specific way a company generates income
ex. selling popcorn in a cinema and also selling t-shirts (2 revenue streams)
resilient business
when a business has multiple and diverse revenue streams
- when it has the ability to withstand and adapt to a disruption
