3.3 Costs and Revenues in Business

These flashcards cover key concepts related to costs and revenues in business management.

What are fixed costs?

Fixed costs are expenses that do not change regardless of output and must be paid even with no production.

What are variable costs?

Variable costs are expenses that vary directly with the level of output, meaning they increase as production increases.

What are direct costs?

Direct costs are expenses that can be directly attributed to a specific project or product.

What are indirect costs?

Indirect costs, or overheads, are expenses that cannot be directly traced to any single product or project.

How is total revenue calculated?

Total revenue is calculated using the formula: Sales Revenue = Price x Quantity Sold.

What are some examples of revenue streams other than sales revenue?

Examples include advertising, transaction fees, franchise costs and royalties, sponsorships, and subscriptions.

What is the difference between start-up costs and running costs?

Start-up costs are initial expenses incurred to start a business; running costs are ongoing expenses for operating the business.

Give two examples of fixed costs for a business.

Rent for premises and salaries for administrative staff.

Give two examples of variable costs.

Raw materials and utilities.

What could be a reason for a business to reduce its fixed costs?

To increase profitability and maintain operations during periods of financial strain.