3.3 - Costs and Revenue

Question 1

what is the calculation for profit

Answer 1

• revenue - (fixed costs + (quantity sold x variable costs))
• revenue - total costs

Question 2

definition of profit

Answer 2

the amount of money retained by a business after all costs have been subtracted

Question 3

definition of revenue

Answer 3

• the amount of money a business retains before subtracting all costs
• the income recieved from the sale of a good or service

Question 4

what is the calculation for revenue

Answer 4

price of product x quantity sold

Question 5

revenue streams definition

Answer 5

the different sources and activities through which a business generates revenue (obtaining money)
* most common - sale of goods and services
* eg. sponsorships, merchandise, donations

Question 7

pros/cons of having many revenue streams

Answer 7

pros
* allows a business to generate more profits and revenue
* diversification of product portfolio - reduces a business’s reliance on one product

cons
* it may bring a business away from original objectives

Question 8

fixed costs definition

Answer 8

costs that remain the same no matter the quantity of product sold

Question 9

variable costs definition

Answer 9

costs that vary with the amount of output produced

Question 10

direct costs definition

Answer 10

costs that can directly contribute to the production of products and the profitability of a business
* many are variable costs
eg. restaurant
* food
* drinks

Question 11

indirect costs/overhead costs definition

Answer 11

costs that are not clearly identifiable with each unit of production
* (Costs that do not directly contribute the production of the goods or services but are nevertheless necessary for the business to run)
* many are variable costs
eg. restaurant
* tables
* electricity bills