cost revenue and profit - business

Fixed costs

are costs that are fixed in the short-term running of a business and have to be paid even

when no production is taking place. They have to be paid whether the business is making any sales or not.

Fixed costs are also known as overhead costs.

Variable costs

Variable costs (VC) are costs that change in the short-term running of a business and are paid according to

the output produced.

Total costs

Total costs is the cost to the firm of producing output over a period of time

Formula total cost (TC)

TC = FC + VC

Average cost (AV)

The average cost of production is the cost of production a single unit of Output

Average cost formula

AVERAGE COST PER UNIT (unit cost) = TOTAL COST (T)/ TOTAL QUANTITY PRODUCED(Q)

Revenue

Revenue is the total income a firm earns from the sale of its goods and services. The more the sales, the more the revenue.

Total revenue

Total Revenue (TR) = Quantity sold x price

Average cost

Average Revenue = Total Revenue (TR) / No. of units sold (Sales)

Calculating profit

Total Revenue – Total Cost = Profit