3.3 Costs and Revenues

• Total costs=variable costs+fixed costs
• Sales revenue=price x quantity sold
• Set up costs are the items of expenditure needed to start a business.
• Running costs are the ongoing costs of operating the business.
• Fixed costs are the costs of production that a business must pay regardless of output.
• Variable costs are the costs of production that change in proportion with output.
• Direct costs are specifically related to an individual project/output of a product. Typically they are variable costs.
• Indirect/overhead costs cannot be traced to a single product. Typically they are fixed costs.
• Revenue streams are different means for sales revenue.