108 Revenue, costs and profit Flashcards
Revenue (Formula)
Money a business makes from sales
Quantity sold x Selling price
Profit (Formula)
Amount left after a business subtracts total costs from the revenue they generate from selling products to customers
Total revenue - Total costs
Fixed costs
Do not vary with output such as rent and insurance
Variable costs
Costs that change in proportion to changes in output. Examples are raw materials and stock
Semi variable stock
Costs that include both fixed and variable costs.
Such as employee monthly salary, but extra for overtime
Direct costs
Costs identified with the production of a good/service
Indirect costs (overheads)
Costs which cannot be matched against each product because they are paid regardless, example is rent
Total costs (Formula)
Total Fixed costs + Total Variable costs
Contribution (Formula)
Selling price - Variable cost per unit
Shows if products cover own variable costs
Break even (Formula)
The point where a business doesn’t make a profit or a loss
Fixed costs / Contribution (Selling price - Variable cost per unit)
Margin of safety
How much a producer can reduce output before the business starts to make a profit or a loss
Actual output - Break-even Output
