1.3.2 Business revenues, costs and profits

Question 1

Equation Revenue

Answer 1

Revenue = Price * Quantity Sold

Question 2

Fixed Costs

Answer 2

Are costs that have to be paid regardless of how muc hthe business produces. e.g management salaries, rent.

Question 3

List some examples of fixed costs

Answer 3

• Rent
• Salaries
• Utilities
• Property taxes

Question 4

Variable costs

Answer 4

These are costs that change as the level of output increases. e.g. raw materail costs, wages

Question 5

List some examples of variable costs

Answer 5

• Raw materials
• Packaging
• Labor directly involved in a companys manufacturing process.

Question 6

Total costs

Answer 6

Are the sum of sum all of all fixed costs plus all varaible costs.

Question 7

Equation Total Costs

Answer 7

Total costs = Variable costs + Fixed costs

Question 8

Equation Profit

Answer 8

Profit = Sales revnue - Total costs

Question 9

Income Stream:

Answer 9

The source of regular income that a business receives. This could be through the money it receives from customers, or other areas such as investment income

Question 10

Viable:

Answer 10

Capable of working or succeeding

Question 11

Break-Even Point:

Answer 11

The point where revenue received meets all the costs of the business

Question 12

Equation Interest rate

Answer 12

Interest rate = Interest paid / amount borrowed * 100

Question 13

Equation Break- even point

Answer 13

Break-even point = Fixed costs / (Selling price - Variable costs perunit)

Question 14

Equation Margin of Safety

Answer 14

Margin of Safety = Level of output - Break-even point

Question 15

Margin of safety

Answer 15

Is the numerical difference between a firm’s level of sales and its break-even quantity. The larger margin of safety, the better it is for the business.