3.

2 Costs and revenues

https://www.youtube.com/watch?v=p9RIiXf1NVI
Two teachers – cost behaviour
 Costs and revenues
• LO: Investigate cost and revenue sources for businesses
Starter
• List 10 costs that EISJ has.
Extension
• Suggest ways to reduce these costs
All: Identify types of costs (level 1-2)
Most: Calculate average fixed and variable costs (level 3-5)
Some: Evaluate the suitability of revenue streams (level 6-7)
 Types of costs
• Fixed Costs (costs that do not vary
depending on the level of output)
• Variable Costs (costs that vary
directly with the level of output)
• Semi-variable Costs (contain an
element of both fixed and variable
costs, they tend to charge
additionally when you exceed a
certain limit)
 Types of costs
• Direct costs – costs that can be directly
traced back to the production of a product.
They can be fixed or variable. This is Cost formulas
generally used when firms produce more than TC = TFC + TVC
one product and use different cost centers. TVC = AVC x Q
(direct labour, direct materials) TFC = AFC x Q
• Indirect costs (overheads) – Cannot be
traced to production or sale of a single
product. (administration costs, security,
cleaning)
Activity
 Revenue streams
Revenue = Price x Quantity
Average Revenue = Total
revenue/Quantity

• Revenue is income received from sale

of goods and services.
• Revenue streams are income earned
from methods other than selling goods
and services.
 Revenue Streams
• Transaction Fees – Airlines • Dividends
• Franchisee fees and royalties • Donations (schools, universities)
• Sponsorship revenue (football • Interest earnings (savings)
clubs) • Advertising revenue
• Subscription fees (Amazon prime)
Activity(websites/apps)
Choose a business and investigate their revenue
• Merchandise (Theme parks) streams. What percentage their revenue comes from
selling products and what other ways do they earn
revenue.
Extension
Suggest potential additional revenue streams for EISJ