Business Revenue and Cost

Costs

The process of determining the cost of producing or supplying a product or service to the customer.

Revenue

The total value of sales made within a trading period.

Profit

What is left from revenue after costs have been deducted

Fixed costs

The expenseses that do not alter in relation to changes in demand or output. They have to be paid whether the business trades or not.

Variable costs

Costs that varies in direct proportion to changes in output, such as raw materials, components, peice rate labour and energy used in production.

Semi-Variable costs

A cost which consists of both fixed abd variable elements

Direct cost

A cost which can be clearly identified with a particular unit of output

Indirect (overhead) cost

A cost which cannot br identified with a particular unit of output. It is incurred by the whole organisation or department.

Total cost

The entire cost of producing a given level of output

Contribution

The amount of money left over after variable costs have been subtracted from revenue. The money contributes towards fixed costs and profit

Break-even

Break-even is a point in the business where the profit is equal to the costs.

Break-even chart

A line graph showing total revenue and costs at all possible levels of output or demand

Break-even point

The intersection of total revenue and total costs on a break-even chart.

Margin of safety

The range of output between the break-even level and the current level of output, over which a profit is made