3.2 Accounts-Costs & Revenue-

Key Learning Outcomes:

• Explain the different types of costs, using examples• Comment on the meaning of the term revenue and using examples

suggest various revenue streams available to organizations

Types of Costs

• Fixed - • Variable – • Semi-Variable –ex: starts off fixed, gets established, and then there

are changes• Direct - • Indirect – ex: the cost of “raw ingredients” to make the actual product

that you sell

Total Revenue: “TR”(aka Sales Revenue, Turnover)

• The total amount of money a firm receives from its sales. It does not take costs or expenses into account.• It is calculated using this formula:

TR = price per unit x quantity soldTR = P x Q

https://youtu.be/Udltkvm9HLc

EXAM TIP:• In most cases indirect costs are usually FIXED COSTS while direct costs

are usually VARIABLE COSTS. However, both indirect and direct costs can be either fixed or variable depending on the specific nature of business activity…..so read and consider the circumstances carefully when reading a Case Study.

Partner Work:1) List the costs associated with these companies/organizations. Brainstorm! It may not be obvious.2) Classify the costs into either FIXED, VARIABLE, or SEMI-VARIABLE. Make a chart that is easy to read and follow.3) Then decide which costs can also be classified as DIRECT or INDIRECT.

• An airline• A mobile phone

company

• A high school• A hospital• A bank