A-level Business Studies Lesson 03

Question 1

Price

Answer 1

The amount paid by a customer to purchase one unit of a product

Question 2

Total revenue

Answer 2

The income received from selling goods/services

Question 3

Fixed costs

Answer 3

Costs that are not directly affected by output, e.g. rent

Question 4

Variable costs

Answer 4

Costs that are directly affected by output, e.g. raw materials

Question 5

Total costs

Answer 5

The sum of fixed costs and variable costs

Question 6

Profit

Answer 6

The difference between the income of a business and its total costs

Question 7

Contribution per unit (Unit contribution)

Answer 7

The amount of money each sale contributes towards paying fixed costs. Once the fixed costs are paid, it will indicate how much profit has been made.

Question 8

Overtrading

Answer 8

Overtrading happens when a business expands too quickly without having the financial resources to support such a quick expansion. This leads to serious cash flow problems which can ultimately lead to business failure.