Costs and Revenues

This set of flashcards covers key concepts related to costs and revenues in a business context.

Cost

Refers to the money spent in producing the good or service.

Revenue

Refers to the income generated from the sale of the good or service.

Fixed Costs (FC)

Costs that do not change regardless of output; must be paid regularly.

Variable Costs (VC)

Costs that vary with production; increase with output.

Total Costs (TC)

Calculated as the sum of total fixed costs (TFC) and total variable costs (TVC).

Profit

Calculated by subtracting costs from revenue; the financial gain of a business.

Direct Costs

Costs that can be traced directly to a specific product or service.

Indirect Costs

Costs that cannot be directly traced to a specific product or service.

Total Revenue (TR)

Total amount of money from sales calculated as price multiplied by quantity sold.

Revenue Streams

Various sources of income coming into a business, such as sales, royalties, and donations.

Total costs and costs formula

TC = TFC + TVC

TVC = AVC x Q

TFC = AFC x Q

Revenue Formula

TR = P x Q

AR = TR/Q since P = TR/Q then AR = P