Business revenue and costs - 108

Question 1

What is revenue, including the formula?

Answer 1

All the money a business makes from sales
selling price x quantity sold

Question 1

Define fixed costs

Answer 1

Costs that do not change with output

Question 2

Define Indirect costs

Answer 2

costs that can be directly attributed to a unit of production or service

Question 3

What is contribution?

Answer 3

Selling price per unit - variable costs

Question 4

Break even formula

Answer 4

Fixed costs/CPU

Question 5

Advantages and Disadvantages of breakeven

Answer 5

(+)Useful in business plan as it can help seek a loan
(+)They can use ‘what-if’ analysis e.g. the effects (what if) the fixed costs increased by 10%
(+)May be useful to set targets
(-)Assumes all goods produced are sold, and sold at the same price
(-)Assumes the relationship between costs and revenue are linear. In reality costs can rise and fall at different levels of output

Question 6

Define variable costs incl formula

Answer 6

costs that do change with output (costs per unit x the quantity made/sold)

Question 7

Define semi-variable costs

Answer 7

can be fixed or variable depending on the situation

Question 8

Define direct/overhead costs

Answer 8

General costs that cannot be attributed to the production of the product or service