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Different Types of Costs
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So I hear you want to open up your own ice cream shop. I'm here to help you understand key terms and the types of different costs.
Ice Cream
Alright, what's first then?
Fixed Costs and Variable Costs.
Fixed costs are costs that never change regardless of the output. However, variable costs vary with the level of output.
Oh! So a fixed cost would be rent and a variable would be the ice cream cones.
Total Cost
Total cost is the variable costs and the fixed costs added together. It can be used to calculate profit or loss.
Exactly.
So total cost is how much I'm spending all together?
Revenue
Revenue is the amount of capital generation through sales. Essentially, it's how much money is made from selling your ice cream.
No. Revenue doesn't take your spending into account.
Would my revenue be affected by my total costs?:
Profit and Loss
Profit and Loss are very important. They are how much money your business will make when covering the total costs too.
Profit means you make more money than you spend, while loss means you make less money than you spend. It is calculated by: revenue - total costs
So what's the difference? And how do I calculate them?
Ice Cream
Thank you so much. I understand the importance of these key terms, and now I feel more ready than ever to start my business
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