3.3 Costs and Revenues

Variable Costs

Those costs that vary with output.

Fixed costs

Those costs that, during the relevant period, do not vary with output or activity.

Total costs

The sum of the fixed costs and the variable costs.

Direct costs

A cost that is precisely traceable to a specific cost object, which may be a product, a service or a department.

Indirect costs/overheads

Costs that are used in multiple areas or activities of the business and, therefore, are not traceable to a specific cost object.

revenue

The income that a business generates.

Total Revenue Calculation

total revenue = price x quantity

Revenue stream

Income that a business generates for a particular activity.

Revenue Stream Examples

subscription

Advertisement

Transaction fees

franchise

Sponsorship