2.4 Fixed and Variable Expenses

Profit

The positive difference obtained when expenses are subtracted from revenue.

Expense Equation

The sum of the fixed and variable expenses.

Revenue

The income a business receives from selling a product.

Loss

The negative difference obtained when expenses are subtracted from the revenue.

Variable expenses

Expenses that depend on the number of items produced; such as jeans and paint.

Fixed Expenses

Expenses that do not change based on the quantity produced, such as furniture or computer.

Revenue Equation

R = pq where R represents revenue, p represents the price, and q represents the quantity of products sold.

Breakeven point

When the expenses and the revenue are equal, so that there is no profit or loss.