3.2 Costs and Revenues

Costs - The expenditure in production of a good or service.

Fixed Costs - Costs of production that are independent of the scale of output. 

Variable Costs - Costs of production that change in proportion with the level of output or sales.

Semi-Variable Costs - Costs that only change when production or sales exceeds a certain level of output.

Direct Costs - Costs that can be attributed to the output of a particular product or a specific cost center; without which the costs would not be incurred.

Indirect Costs (Overheads) - Costs that cannot be clearly traced to the production or sale of any single product.

Revenue - Money coming into the business, usually from the sale of goods and/or services.

Possible Revenue Streams

Advertising Revenue - Renting out space on platforms, such as roadside billboards, blogs, e-commerce websites and video streaming platforms, for promotional activities. Digital advertising is a major revenue stream for social media platforms and other tech giants such as Google and YouTube.

Transaction Fees - A markup in price or commission for the sale of goods. 

Franchise Costs and Royalties - Franchisees pay a licensing fee and royalty payments based on sales revenue to franchisors.

Sponsorship Revenue - A below-the-line promotion whereby the sponsor financially supports an organisation in return for prominent promotional display of the donor’s brand trademark.

Subscription Fees - A regular collection of fees from customers for the use and access to a good or service.

Merchandise - Companies with large brand names can rely on merchandise sales, where their trademark increases the value of regular goods

Dividends - Being a shareholder of other companies entitles a business to payments of any declared dividends.

Donations - Financial gifts from individuals or other organisations

Capital Gains - Interest earned on accounts in banks or a gain in the value of assets such as land or stocks in other companies.