IB Business Finance 3.3 - Costs and Revenues

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9 Terms

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Cost

The amount that needs to be spent to purchase the resources that are necessary to produce or sell a product

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Fixed cost

Do not change in relation to output. E.g. rent, interest, advertising, salaries, etc.

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Variable costs

Costs that change in proportion with the level of output. E.g. raw materials.

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Direct costs

Costs that can be directly traced/related to a specific product or project

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Indirect costs

Costs that can not be related to any particular product. E.g., internet fees.

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Revenue

Money/income coming from product sales

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Total revenue

Price x Quantity

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Average revenue

Total revenue / Quantity

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Revenue streams

Means other than trade activity of generating income for an organization. E.g. interest on deposits, merchandise, subscriptions, etc.