Cost and Revenues
Costs and Revenues
What is cost?
If you go to a store and like an item and you want to buy it, which of the following questions would you ask: What’s the price of …..? 0R How much does …. cost?
Examples of costs – set-up
Examples of costs - running
Fixed Costs
5000
What happened to the fixed costs if for some reason the company had technical problems and was unable to produce for 2 weeks?
What happens if the landlord decided to raise the rent due to high property prices in the economy?
Variable Costs
> Production, > Costs
Total Costs
Semi-variable costs
They contain an element of both fixed and variable costs. Only tend to change when production or sales exceed certain level of output. Some examples could be a mobile telephone bill, paying overtime to employees and commissions to the salesforce.
Direct Costs
They also change with output level. It is specifically related to a particular project or output of a single product; without that particular project or product, the costs would not be incurred by the business. For example, the cost of meat in a hamburger can be attributed directly to the cost of manufacturing that product, as could the cost of packaging materials and preservatives. If a company produces artisan furniture, the cost of the wood and the cost of the craftsperson are direct costs—they are clearly traceable to the production department and to each item produced—no allocation was needed. On the other hand, the rent of the building that houses the production area, warehouse, and office is not a direct cost of either the production department or the items produced.
Indirect Costs (overheads)
A.k.a facilities and administrative costs (F&A), cannot be clearly related to the level of output of any single product, i.e. they are not directly linked with the level of production ot sale of a product. For example, the costs of fuel and power can’t be associated with the level of production but may not be
What is cost?
If you go to a store and like an item and you want to buy it, which of the following questions would you ask: What’s the price of …..? 0R How much does …. cost?
Examples of costs – set-up
Examples of costs - running
Fixed Costs
5000
What happened to the fixed costs if for some reason the company had technical problems and was unable to produce for 2 weeks?
What happens if the landlord decided to raise the rent due to high property prices in the economy?
Variable Costs
> Production, > Costs
Total Costs
Semi-variable costs
They contain an element of both fixed and variable costs. Only tend to change when production or sales exceed certain level of output. Some examples could be a mobile telephone bill, paying overtime to employees and commissions to the salesforce.
Direct Costs
They also change with output level. It is specifically related to a particular project or output of a single product; without that particular project or product, the costs would not be incurred by the business. For example, the cost of meat in a hamburger can be attributed directly to the cost of manufacturing that product, as could the cost of packaging materials and preservatives. If a company produces artisan furniture, the cost of the wood and the cost of the craftsperson are direct costs—they are clearly traceable to the production department and to each item produced—no allocation was needed. On the other hand, the rent of the building that houses the production area, warehouse, and office is not a direct cost of either the production department or the items produced.
Indirect Costs (overheads)
A.k.a facilities and administrative costs (F&A), cannot be clearly related to the level of output of any single product, i.e. they are not directly linked with the level of production ot sale of a product. For example, the costs of fuel and power can’t be associated with the level of production but may not be