Costs and revenues 3.1

Cost

The total expenditure incurred by a business in order to run its operations.

Revenue

A measure of the money generated from the sale of goods and services.

Total Revenue (TR)

"All the income received".

Total costs (TC)

The sum of variable and fixed costs.

Loss

When the costs are greater than revenue.

profit

It is calculated by finding out the difference between revenues and costs.

Revenue streams

Are the flow of money from different products or services, sources or divisions of the company.

Fixed costs

do not change with the amount of goods or services produced. Ex: rent, interest payments, insurance and salaries.

Variable costs

change with the amount of goods or services produced. Ex: raw material, packaging, sales commissions, wages (overtime).

Semi variable costs

remain fixed for a given level of production and they become variable when certain level is exceeded.

Direct costs

costs attributed to the product

Indirect costs (overheads)

are shared and cannot be easily assigned to specific goods or services or cost centers.

Unit contribution

It is the price per unit minus the variable cost per unit.

Total contribution

Total revenue minus total variable cost.