A3.3 costs and revenues

what are startup costs?

the initial expenses a new business incurs to get up and running before it starts generating revenue (equipment, legal fees, and marketing campaigns, rent, initial inventory, employee salaries)

what are running costs?

the regular expenses required to keep a business or system operational, such as wages, rent, utilities, and fuel

what are fixed costs?

costs that a business must spend regardless of whether or not they sell any of their product. typically the same in their amounts and are often paid every month (rent, salaries, insurance premiums, loan interest, tax)

what are indirect costs?

costs that are not directly tied to the production or sale of a product (rent, utilities, administrative salaries, insurance, general office supplies)

what are variable costs?

costs that vary in direct relation to the number of products sold. the more sales that occur, the more variable costs go up

what are direct costs?

costs that are more typically tied to a specific project or product that is sold (raw materials, labor for production)

what is revenue?

total amount of moneymade through the sale of all goods and servicesas well as earnings made from dividends,interest and rent of any owned real estate.

what is profit?

total amount remaining after you deduct all costs from the total revenue

formula for total costs (TC) and total fixed costs (TFC)

TC = TFC + total variable cost (TVC)

TFC = avg fixed cost (AFC) x quantity (Q)

formula for total variable cost (TVC)

avg variable cost (AVC) x Q

formula for avg fixed costs (AFC) and avg variable costs (AVC)

AFC = TFC/Q

AVC = TVC/Q

formula for average costs (AC)

TC/Q

AFC + AVC

formula for revenues

total revenue (TR) = Profit (P) x Q

avg revenue (AR) = TR/Q

so AR = P

what are revenue streams?

any source of revenue a company might have. passive revenue streams come into a business with limited effort on the part of the business (dividends, loan interest, donations)