2.2.2 Sales, revenue and costs Flashcards
1
Q
sales:
A
- demand = no of products customer willing and able to buy
- physical quantity of goods/services sold = output =volume
2
Q
revenue
A
- monetary value of sales
- generates revenue by satisfying consumer demand
- arises through trading activity (main function of a business= good/service providing for sppu) of a business
3
Q
costs
A
- costs associated with setting up and running a business
- amounts that a business incurs in order to make goods and or provide a service
4
Q
10 factors influencing demand and therefore revenue:
A
- trends/fashion/interests (consumer needs)
- state of economy
- scarce supply
- branding (loyalty)
- competitors (availability of substitutes)
- price (how sensitive consumers are to change in price)
- tech advances
- quality/aesthetics
- seasonality
- USP/function
5
Q
total revenue equation
A
total revenue = volume sold x average selling price
-value of revenue achieved in a given period is a function of quantity of product sold multiplied by price customer paid
6
Q
increase revenue
A
-increase price and volume
- increase quantity (amount) sold:
- cutting price or offering volume related incentives
- key issues - achieve higher selling price
- add value
- MR suggests price are high enough/too low
7
Q
types of costs
A
- variable costs: costs change as output varies
- lower risk for start up, no sales = no variable costs
e. g. wages, stock, maintenance - fixed costs: costs that don’t change when output varies
- fixed costs increase risk of a start up
e. g some utilities, rent, salary, asset, business rates
8
Q
total variable costs
A
variable cost per unit x output
9
Q
total costs
A
fixed costs + total variable costs
10
Q
Simple profit
A
Income left after all costs deducted from revenue
TR - TC
11
Q
Profit
A
Reward or return for taking risks and making investments
12
Q
Profit equation
A
Total contribution - Fixed costs
