Business Revenue & Costs

Question 1

Revenue

Answer 1

Revenue is the money a business makes from sales. The total amount of money a business receives from its sales is called total revenue

Question 2

Revenue Formula

Answer 2

Total Revenue = quantity sold x selling price

Question 3

Profit

Answer 3

Profit + total revenue - total costs

Question 4

Fixed Costs

Answer 4

Costs that remain the same whatever the level of output produced or products sold. they do not vary on output, fixed costs will still have to be paid.

E.g. Rent

Question 5

Variable Costs

Answer 5

Variable costs vary in direct proportion to output. As output increases so does variable costs.

Question 6

Total Costs

Answer 6

Total costs are found by adding together fixed costs and variable costs.

Fixed Costs + Variable Costs = Total Costs

Question 7

Direct Costs

Answer 7

Direct costs are costs that arise specifically from the production of the product or the provision of a service.

examples of direct costs include
- rent on a shop
- materials or components
- direct labour

Question 8

Break Even

Answer 8

The point at which a business makes neither a loss or profit. For small and new businesses this might be seen as a success. However, Larger business would want to avoid breaking even.

Break Even = Fixed Costs
——————
Selling Point - Variable Costs (Contribution)

Question 9

Contribution i

Answer 9

The difference between the selling price per unit and the variable cost per unit is known as contribution towards covering the business’s fixed costs.

E.g Selling Price is £9, the variable cost is £5 - the contribution is £4 per unit sold.

If fixed costs are £2000 per month and his contribution is £4 per box

£2000/4 = 500 boxes.

In order to break even he must sell 500 boxes.