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3.2. Costs and Revenues

  • Types of costs
    • (Examples based on a store like Jollibee)
    • Fixed – costs that do not increase or decrease based on quantity of goods produced or capacity of production.
      • Rent, electricity, utilities
    • Variable – costs that increase as more products are produced or if a service is at a higher capacity of production
      • Food, paper bags, utensils
    • Semi-variable – costs that contain both fixed and variable cost elements
      • Salaries (fixed = regular hours, variable = overtime hours)
    • Direct – costs that can be directly attributed to the production of a good or service in a specific aspect or department; can be fixed or variable
      • Direct (fixed) – salary of chickenjoy fryer
      • Direct (variable) – cost of raw chicken
    • Indirect/Overhead – costs that aren’t directly part of the product or process of the product/service being sold; can also be fixed or direct
      • Advertisements, franchise fee, etc.
  • Total revenue
    • Total amount of sales generated through different product lines/services offered, without subtracting any costs
    • e.g. sale of all food, beverages, and toys
  • Revenue streams
    • One source of sales or revenue that a business has
    • A business can have several revenue streams
    • e.g. payment from franchisees, revenue from company owned stores