1. Costs & Revenue
Chapter 31

2. Direct Costs Costs that can be identify with each unit of production.
For example, the direct costs for the fried chicken would be the costs of manufacturing it, packaging it and price of the chicken.

3. Indirect Costs
Costs that cannot be identify with each unit of production. Also known as Overhead Costs.
For example, an indirect costs for the Regents School is cleaning it.

4. Types of Indirect Costs
Production Overheads- Factory rent and electricity
Selling and Distribution Overheads- Warehouse, packing, distribution costs and salaries of sales staff
Administration Overheads- Office rent and white-collar worker’s salaries
Finance Overheads- Interests on loans

5. Fixed Costs
These remain fixed and is not affected by the level of output
Variable Costs
Costs the vary with output
Semi-Variable costs
Costs that have both fixed cost and a variable cost element
An example of this would be a sales person’s fixed basic wage + commission that varies with sales

6. Marginal Costs
The extra cost of producing one more unit of output

7. Cost
Direct
Indirect
Fixed
Variable
Rent of Factory
Management Salaries
Electricity
Lease of Regents school buses
Wood and materials used in production
Maintenance costs for a school

8. Revenue Revenue The income received from the sale of a product
Total Revenue
Total income from the sale of all unit of the product=quantity x price

9. Contribution to fixed costs
Must not be confused with profit, the contribution of a product refers to how much it covers the fixed cost once the variable cost have been covered.
Contribution per unit
Selling price of a product less variable costs per unit
Total Contribution
Total revenue less total variable costs of producing it

10. Activity
AdiNike has a fixed cost of $10000 and variable costs of $2. AdiNike is to produce 1000 shoes. Calculate the total cost.

11. Activity
The following data refers to the cost and revenues of Ham’s Toys Ltd. when operating at units of output per month. Calculate the total cost of producing 2000 units.
Item
Cost/Revenue
Price
$15
Raw Materials per unit $5
Overheads
$500
Rent
$2000
Salaries
$3000

12. Socrative: Room Number: 971865

13. Homework
Activity 31.4 Questions 1,2 and 3 page 330