1.3 Importance of Cost and Revenue Flashcards
1
Q
How do you calculate profit?
A
Profit = Total Revenue - Total Costs
2
Q
What can Revenue also be known as?
A
Turnover Sales Revenue Income Earnings Takings
3
Q
How do you calculate Revenue?
A
Revenue = Selling price x number of items sold
4
Q
What are costs?
A
The money paid out by the business to suppliers
5
Q
What are the costs in a business?
A
Overheads - Electricity and Utility bills, rent Equipment Wages Raw materials Training
6
Q
What are the two types of costs?
A
Fixed Costs
Variable Costs
7
Q
What are fixed costs?
A
Costs that do not change directly with the level of output
8
Q
What are variable costs?
A
Costs that change directly with the output
9
Q
How do you calculate total costs?
A
Total costs = Total fixed costs + Total variable costs
10
Q
Why is profit important?
A
Increases market share Can be used to expand the business Creates more money for advertising Retained profits Rewards owners To measure the success of the business To enable the business to borrow money from banks or investors
