Costs and Revenue

Question 1

Costs

Answer 1

Total expenditure a business incurs in order to run its operations

Question 2

Revenue (sales revenue, turnover)

Answer 2

refers to the amount of money a business generates from the sale of goods and services

Question 3

revenue formula

Answer 3

TR=PxQ

Question 4

Profit

Answer 4

Difference between revenue and cost

Question 5

profit formula

Answer 5

Pr=Tr-Tc

Question 6

Fixed costs (FC)

Answer 6

the costs of production the firm has to pay regardless of how much it produces or sells ex: rent, insurance, interest or loans

Question 7

Variable costs (VC)

Answer 7

the costs of production that change in proportion with the level of production (output) or sales ex: sales commissions, packaging costs, energy usage costs

Question 8

Total costs (TC)

Answer 8

sum of fixed costs plus variable costs
TC=FC+VC

Question 9

Direct costs

Answer 9

costs that can be identified with the production of specific goods and services and therefore can be easily assigned and traced to a particular department or process (cost centres)
ex: cost of flour for a bakery, cost of workers in a bakery etc

Question 10

Indirect costs

Answer 10

costs that are not clearly identified with the production of specific goods and services and hence are very difficult to trace to a product activity, sale or department, therefore are difficult to assign to a cost centre.
ex: rent, electricity bill

Question 11

Different revenue streams

Answer 11

rental income, sale of fixed assets, dividends, interest on deposits, donations, subsidies, advertising revenues, merchandise