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TYPES OF COSTS

Fixed Costs

Semi - variable costs

Variable Costs

Direct Costs

Total Revenue

Indirect Costs

Are costs that do not change or vary with the amount of goods or services produced. For example rent and salaries.

These are costs that vary or change with the number of goods or services produced. For example raw material costs and sales commissions.

These are costs comprising both fixed and variable components. For example labour costs and monthly rental for a phone line.

These are costs that can be identified with or clearly attributed to the production of specific goods or services. For example cost of flour used in making bread in a bakery and the cost of chicken in a fast food restaurant.

These are costs that are not clearly identified with the production of specific goods or services. For example legal expenses and office staff salaries.

This is the total amount of money a firm receives from it sales. It is calculated by multiplying the price per unit by the number of units sold. The formula is

Total revenue = price per unit × quantity sold

TR = P × Q