COST, Revenue , profit

Lesson objectives

Difference between fixed and variable costs.

Difference between direct and indirect costs.

Difference between costs and revenue.

2 mins starter…

List as many costs in bread factory as you can….

Which are Fixed and Variable costs?

BREAD FACTORY

FIXED COSTS

Rent VARIABLE COSTS Wages

Costs

Fixed Costs (FC) – Do not change with output.

Variable costs (VC) change with output.

Total costs (TC) = FC + VC

Average Cost (AC) = TC/Quantity

Direct v Indirect

Direct costs = Variable costs

Indirect costs = Fixed costs

Revenue

2 girls sell 18 glasses of lemonade for $10.

How much money do they make?

18 x $10 = $180

Total Revenue (TR) is total sales

TR = Price x Quantity

Profit

This is what the entrepreneur gets after all costs have been paid.

Profit is the driving force behind every business and firm in operation.

Profit = TR – TC.

Can you figure out equations for

Revenue ____ x____ Profit = ___ - _____ Total cost = ___ + VC

Fc = VC =

AVERAGE COST = ____

Diagrams FC

VC

TC

TR

Lesson objectives

Difference between fixed and variable costs.

Difference between direct and indirect costs.

Difference between costs and revenue.