Business Revenue and Costs Flashcards
what is the definition for revenue?
The value of sales over a period of time
what is the equation for revenue?
selling price x sales volume
what is the definition for sales volume ?
The quantity of products sold in a particular period of time
what is the equation for sales volume?
sales revenue / selling price
why is sales volume important?
to compare it to trends over time and gauge how well the product is performing with forecasts or budgets
what is the equation for profit?
total revenue - total costs
what is the definition for profit?
money left over from sales after all costs have been paid
what is the definition for costs?
money a business pays out un order to create and sell its products
what is the definition for fixed costs?
costs that do not change with the output produced or the services provided
what is the definition for direct costs?
those that can be linked to a product or service
what is the definition for indirect costs?
cannot be directly linked to a product or service
what is the definition for variable costs?
costs that change in proportion to the amount of output produced or the amount of products sold
what is the equation for variable costs?
quantity produced x cost per unit
what is the definition for semi variable costs?
composition of both fixed and variable costs fixed to a specific level. They become variable after this production level is exceeded. If there is no production they will be fixed costs
what is the equation for semi variable costs?
extra fixed costs + extra variable costs
what is the definition for total costs?
the total expenses involved in reaching a particular level of production
what is the equation for fixed costs?
fixed costs + variable costs
what is the formula for gross profit?
revenue - cost of sales
what is operating profit definition?
how much profit has been made in total from trading activities of the business after deducting operating expenses
what is operating profit equation?
gross profit - other operating expenses
what is net profit definition?
what is left after all costs of a business have been taken from revenue
what is net profit equation?
operating profit - interest (from loans)
what is the definition of contribution?
The measure of how much each item sold contributes towards the fixed costs of the business
what does a higher contribution value indicate?
The quicker the fixed costs are covered
what is the equation for contribution?
selling price per unit - variable costs per unit
what is the definition for break even point?
the point where total revenue equals total costs
what is break even used for?
understanding how many units of output the business needs to sell to cover its costs
what is the equation for break even point w/o contribution?
Fixed Costs ÷ (Sales price per unit – Variable costs per unit)
what is the equation for break even point with contribution?
total fixed costs / contribution per unit
