the main point of this class is to learn to categorize all coasts into two groups and to learn where else income can come from in addition to product sales there are two parts in this class the first one is types of coast and the second one is revenue streams and there are two assessment objectives that are both ao2 so we are learning to explain different types of coasts and we are learning to explain different kinds of revenue streams I hope you will enjoy this short but really informative video class foreign Coast is the amount that needs to be spent in order to purchase a resource that is necessary to produce or sell a product there are two categories of coasts the first category is fixed and variable the second category is direct and indirect this means that any Coast is at the same time fixed or variable and director indirect so the options here are fixed and direct fixed and indirect variable and direct and variable and indirect so there are four types of codes overall or two groups of coasts please remember that it's really important so fixed and variable cost First fixed costs are the ones that do not change in relation to the output for example if you are a furniture manufacturer and you produce chairs you can produce 100 shares you can produce 1000 shares a month regardless of how many chairs you produce you will still have to pay your internet fee which is let's say thousand dollars a month regardless of how many chairs you produce your internet fee is the same so in this case your internet fee is a fixed cost variable costs are the ones that change in proportion to Output in my furniture manufacturer example variable cost could be the cost of wood that is necessary for the production of wooden chairs the more chairs you produce the more wood you need so the higher your variable costs would be very often students think that fixed costs are the ones that don't change because they're fixed and variable costs are the ones that change this is a wrong approach to understanding fixed and variable costs both of them can change what matters is that fixed costs do not change in relation to output for example if your internet provider decides to raise the price and charge you one thousand two hundred dollars instead of one thousand then your fixed cost will change but it has nothing to to do with how many chairs you produce but the coast of wood are directly related to production of chairs the more chairs you produce the more wood you need so Coast will change because the output changes let's have a look at this chart here you can see that fixed costs are not related to Output they are the same regardless of how much you produce however they can change they can go up or down but again output has nothing to do with it variable costs are directly related to Output the higher the output the higher the variable costs are here you can see total cost which start in the same point where fixed costs start another important thing about this chart is that you should not forget to indicate costs and output and unit of measurement unit of measurement for coast is currency dollar rupiah Yuan Yen one Ruble Etc the unit of measurement for output is whatever you produce chair litter of apple juice or whatever the second category of coast is direct and indirect direct coasts are the ones that can be traced and related to a specific project or product for example would the variable cost from my previous example of a furniture manufacturer it would be a variable cost and a direct Coast because you know exactly how much wood you need for reproduction of a particular chair that is why it's direct it's really easy to relate this Coast to a specific product indirect costs are the ones that do not apply to a specific product they apply to the entire organization it's hard to find relationship between these coasts and the specific project or product in my previous example internet fee would be an example of an indirect cost another name for indirect cost is overheads by the way so internet fee is an overhead because you don't know how much internet you spend in order to produce one chair or two chair it sounds stupid it doesn't make any sense so the codes that apply to the entire organization that cannot be related to a specific project or product are called overheads or indirect costs in this picture you can see that these coasts are direct because they relate to specific product and these costs are indirect because it's hard to connect them with one product only so the key learning outcomes here is that there are two groups of coasts this extent variable and direct and indirect one in the same Coast is either fixed and variable and at the same time either direct or indirect in addition to that both fixed and variable costs can change but the difference is what this change is caused by if this change is caused by an increase in output then it's what kind of cost correct variable if the change is caused by some other factors and has nothing to do with the output this is a fixed cost please find the difference between fixed and variable direct and indirect and keep in mind that one Coast is in two categories at the same time foreign as you hopefully remember from unit 1 product can be tangible that would be a good or intangible that would be a service when you sell product that can be either good or service the money that you get from customers is called revenue revenue is not the same as profit profit is revenue minus costs so revenue is just whatever your customers are paying to you we can count the total revenue of an organization by multiplying the price of a product over quantity that is being sold for example if you are selling apples one apple is one dollar and you sell 10 apples then your total revenue is one times ten ten dollars average revenue or Revenue per product sold is total revenue divided by quantity this is really easy to understand so if we use the previous example 10 divided by 10 would be 1 so your your average revenue is one this way price and average revenue is the same thing now we understand what revenue is you understand that it's not the same as profit that it's greater than profit now let's talk about different revenue streams so the most common the main Revenue stream for a company comes from the sales of its main product so for Apple the main Revenue stream would be selling iPhones iMacs MacBooks and Etc however there can be alternative ways to sell things to people and to get revenues these alternative ways to get revenues are called revenue streams so revenue streams are means other than trading activity to generate income for an organization now I will just give you some examples of common revenue streams the first one is dividends for example Microsoft is a shareholder of Apple Microsoft owns Apple to a small extent it's not the main share shareholder don't worry but it still holds some shares in Apple so organizations similar as individuals can become shareholders in different companies this way they are paid dividends and this can be an alternative revenue streams for these organizations another thing that organizations can do in the same way as individuals is put money in a bank deposit their cash on a bank account this way every month or every year the bank is going to pay interest rate and the organization can increase its earnings now remember when you go to the cinema or when you go to buy some toys to your children or to your nephews and nieces you always see a lot of Disney characters as toys or maybe Marvel characters or from any other movie This Is How Disney or any other movie production company is making money this Revenue stream is called merchandise this is when you sell some toys souvenirs t-shirts clothing so every time you buy a toy princess from Disney you are contributing to merchandise as a revenue stream for Disney so all these souvenirs t-shirts clothing and Etc are called merchandise and it is one of the revenue streams for many organizations another Revenue stream that is very common for non-profit organizations is donations this is simply when someone one donates money for some businesses however this can be the main Revenue stream for example for streamers on YouTube and steam for them it's not an alternative Revenue stream for them it's the main one another Revenue stream is sponsorship deals think about your favorite football team remember all football players have different logos on their t-shirts so these logos aren't there for free actually whatever organization puts a logo on the uniform it provides some money to support the football team so this is an alternative Revenue stream for your favorite football team another Revenue stream is advertising revenue for example if you're familiar with telegram they're quite a popular messenger then the main Revenue stream for them is premium subscription from its users however an alternative Revenue stream is when someone buys ads that are shown in group Chats on telegram so at advertising revenue is another example of a revenue stream remember we already talked about Apple that they make money mostly by selling their gadgets however in addition to that Apple sells a lot of different subscriptions to iCloud to Apple music to Apple TV and Etc all these subscriptions are another Revenue stream for Apple in addition to that some companies can sell their rights to use their intellectual property to other organizations or for example they can sell a franchise and let others trade under someone's brand in return for that for intellectual property or franchise the other organization the franchisee or whoever is buying intellectual property has to pay royalties so for example if you are a film company and you created a soundtrack you can put this soundtrack On Media streaming platforms such as Spotify and apple music and you will get royalties for this interaction property so royalties is also a revenue stream in the last example that I'm going to provide is rental income for example there is a huge Factory and it's not using some of its premises so they can rent it out for a restaurant or a coffee shop this way when company rents out some of its property to another organizations it can get some rental income which is the alternative Revenue Stream So I have given you 10 different examples of revenue streams that work differently for different organizations I hope it's really clear and you'll be able not only to recall some of these revenue streams but also to explain what they mean oh yeah yeah this is the end of 3.3 as I mentioned in the beginning of this class our main point was to learn to categorize between two groups of coast and to explain how income can be earned in addition to the main trading activity so before you like this video And subscribe and tell your friends about it and maybe even write a comment please have a look at assessment objectives make sure now you can explain types of Coast fixed variable direct indirect and you can explain revenue streams thank you see you in my next class foreign [Music]