Unit 3.2 Costs and revenues Flashcards
What does ‘cost’ refer to?
The sum of money incurred by a business in the production process.
Example: raw materials, wages and salaries, insurance, advertising, and rent.
What are direct costs?
Costs specifically attributed to the production or sale of a particular good or service that can be traced back to the product or a cost centre.
What are fixed costs?
Costs that don’t vary with the level of output and exist even if there is no output.
Example: cost of rent, management salaries, and interest repayments on bank loans.
What are indirect costs?
Costs that don’t directly link to the production or sale of a specific product.
Example: rent, wages for cleaning staff, and lighting.
What does ‘price’ refer to?
The amount of money a product is sold for.
Example: sum paid by the customer.
What is revenue?
The money that a business collects from the sale of its goods and services, calculated by multiplying the unit price of each product by the quantity sold.
What are semi-variable costs?
Costs that have an element of both fixed costs and variable costs.
Example: power and electricity or salaried staff who also earn commission.
What are total costs?
The sum of all variable costs and all fixed costs of production.
What are variable costs?
Costs of production that change in proportion to the level of output.
Example: raw materials and piece rate earnings of production workers.
What are revenue streams?
Money that comes from different means besides the sale of goods and services.
What are subscription fees?
Charges imposed on customers who use or access a good or service based on a formal agreement.
What are dividends?
Payments made to a business for being a shareholder of other companies.
What are subventions?
Subsidies offered from the government to certain businesses to help reduce their costs of production, usually given to organizations to generate benefits to societies.
