3.3 Costs and Revenues

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17 Terms

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Revenue

Business income or earnings over a period of time

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Formula for revenue

Price per unit x Quantity

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Difference between revenue and profit

Revenue: income brought into business, Profit: revenue minus the costs

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Revenue Streams

Various sources from which a business can earn money, can be active or passive income

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Examples of Revenue Stream

Consulting Services, Subscriptions, dividends from investments, merchandise

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Advantages of Revenue Stream

Should lead to higher revenue, form of diversification (support struggling product), motivating for employees

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Disadvantages of Revenue Stream

Business can lose focus & confuse customers, usually means more cost and workers, could fail which is waste of time & resources

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Turnover

The amount of money taken by a business in a particular period

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Cost

Expenditure or amount paid to produce or sell a good or service

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Profit

Calculated by subtracting revenue from costs

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Fixed Costs

Costs that don’t change no matter the level of output

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Variable Costs

Costs that vary or change with the number of goods or services produced

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Semi Variable

Include both a fixed or variable element

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Direct Costs (operating/VC/COGS)

Costs than can clearly be identified with each unit of production & can be allocated to a cost centre

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Indirect Costs (overhead costs that are for general functioning of business)

Can’t be clearly identified with the unit of production of a product or service

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Examples of Fixed Cost

Rent, insurance, salaries

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Examples of Variable Cost

Raw materials costs, sales, energy usage costs