3.3 Costs & Revenues

Average Cost

the cost per unit of output

Average Revenue

the value of sales received from customers per unit of good or service sold

Cost

the sum of money incurred by a business in the production process

Direct Costs

these costs are specifically attributed to the production or sale of a particular good or service. They can be traced back to the product

Fixed Costs

these costs do not vary with the level of output. They exist even if there is no output

Overheads (aka Indirect Costs)

costs that do not directly link to the production or sale of a specific product

Price

the amount of money a product is sold for

Profit

this exists if there is a positive difference between a firm's total revenues and its total costs

Revenue

the money that a business collects from the sale of its goods and services. It is calculated by multiplying the unit price of each product by the quantity sold

Revenue Stream

the money coming into a business from its various business activities (sponsorship deals, merchandise, membership fees, and royalties)

Running Costs

the ongoing costs of operating the business

Set-up Costs

the items of expenditure needed to start a business

Total Costs

the sum of all variable costs and all fixed costs of production

Total Revenue

the money coming into a business usually from the sale of goods and/or services

Variable Costs

costs of production that change in proportion to the level of output