2.2.2 Sales, Revenue And Costs

Question 1

Calculation of sales volume & sales revenue

Answer 1

• sales volume = the number of units sold by a business
• sales revenue = the value of the units sold by a business plan
  Sales revenue = selling price x number of units sold by a business

Question 2

Different types of costs

Answer 2

1. Fixed costs = costs that do not change as the level of output changes
   - e.g. rent, management salaries, insurance, bank loan repayments
2. Variable costs = costs that vary directly with the output
   - e.g. raw material costs, wages of workers directly involved in the production
3. Total costs = fixed costs + variable costs

Question 3

Calculation of fixed, variable & total costs

Answer 3

Total costs = total fixed costs + total variable costs
Total variable costs = variable cost per unit x quantity
Average total costs = total costs / quantity
Variable cost per unit = total variable costs / quantity

Question 4

Contribution

Answer 4

• refers to a products selling price - the variable costs directly involved producing that unit
  Contribution = selling price per unit - variable cost per unit
• its the amount contributed towards paying off the fixed costs of the business