3.3 Costs and revenues

Expenses that are not easily or clearly attributable to the production of a particular good or service. These costs are often shared across multiple products, departments, or business activities.

• Direct costs

• Fixed costs

• Indirect costs

• Variable costs

Expenses that do not change regardless of the level of output or sales. These costs remain constant over a given period of time.

• Indirect costs

• Fixed costs

• Direct costs

• Variable costs

Expenses specifically attributable to the production of a specific good or service. These costs can be easily traced to the output of a particular product, department, or business activity.

• Indirect costs

• Fixed costs

• Direct costs

• Variable costs

Expenses that fluctuate in direct proportion to changes in the level of output or sales. These costs change based on the volume of production.

• Indirect costs

• Fixed costs

• Direct costs

• Variable costs

Organize these options into the right categories:

Groups:

(a) Fixed costs

,

(b) Variable

• Office supplies

• Packaging (food wrapping)

• Furniture, e.g., office tables and chairs

• Ingredients

• Wages for part-time employees

• Rent (of commercial premises)

• Advertising costs

• Capital equipment (leasing or hiring costs)

• Salaries for managers and permanent staff

• Utility bills (e.g., gas, water, and electricity)

• The __________ of production is the sum of a firm's fixed costs and variable costs.

• Indirect costs

• Total costs

• Direct costs

• Costs

Match the following

• Revenue streams

• refers to the money coming into a business from the sale of goods and services.

• Revenue

• • refers to the various sources of revenue for a business.

• Average revenue

• is the sum of income received by a business from its trading activities.

• Total revenue

• is the amount a business receives from its customers per unit of a good

Total revenue for the sales of a product is calculated by multiplying the number of units sold by the selling price.

• True

• False

To calculate total costs of output, both total fixed costs and total variable costs are added together.

• True

• False

The level of profit or loss of a business can be calculated by using deducting the total cash outflows from the total cash inflows.

• True

• False