Page 174 – 177 To be an utterly fascinating speaker at a business luncheon, talk to your audience about ways they can reduce costs or increase revenues

 Fixed costs do not change with the amount of goods or services produced  Variable costs change with the amount of goods or services produced  Direct costs can be assigned to specific goods or services  Indirect costs are shared and cannot be easily assigned to specific goods or services  Semi-variable costs are a stupid category and I refuse to teach it to you – so you never ever have to remember that some costs such as labour costs can have a variable part and a fixed part – In my opinion this is not a good reason to have a new category of semi- variable costs!!

 Fixed cost (related to time)  Monthly rent, insurance and salaries  Variable cost (related to activity)  Raw materials, sales commissions, packaging and wages  Direct cost (attributed to product)  Cost of raw materials, labour, packaging, electricity to run machines  Indirect cost  Rent, office worker salaries, legal expenses, advertising, insurance – any cost that is not directly attributed to a specific good  Note  Fixed cost category is similar to Indirect, and variable cost is similar to direct

 Research the following organizations and identify the various costs they incur:  A railway  An airline  A mobile phone company  A high school  A hospital  A bank  Classify the costs into either fixed, variable  Highlight the costs that are direct or indirect

 Revenues (TR) are the total amount of money a firm receives from its sales.  TR = Price x Quantity sold

 Earnings and profit both take costs into account; revenue does not  This is how it works:  A firm earns revenues from the sale of goods  Profit is what remains after the cost of goods (direct costs) have been paid  Earnings are the monies remaining after expenses (indirect costs) are paid.  Earnings belong to the firm  Profit = Revenues minus Costs

 Revenue Streams is/are the flow of monies from different products or services or divisions of the company  Examples of other revenue streams:  Rental income (renting part of a factory to another firm)  Sale of fixed assets – selling old buildings or machinery creates a flow of cash  Dividends – firms have investments that produce revenues  Grants and subsidies from government

 Keeping in mind that definitions should be shore and precise with an example,…  And that other questions need to show depth (answering WHAT, HOW and WHY)…  Answer the TAK practice question on page 178