Chapter 1 - Putting Business Into Pratice Flashcards
What is revenue ?
Money coming in from sales
What is the formula for revenue ?
Selling price X number of products sold
What is fixed cost ?
Are cost that don’t vary with output this mean they are not immediately affected by a change in the number of products sold eg rent , Salaries, electricity
What is variable costs ?
Vary with output. This means they are immediately effected by a change in the number of products sold eg postage stock overtime
How do you calculate total cost ?
Variable cost + Fixed cost
How do you calculate profit or loss ?
Total cost - Revenue
What is interest ?
Is the % charged by banks to borrow money. It’s also the % rate received for saving money
What is the formula of gross profit ?
Revenue - variable cost
What is the formula of net profit ?
Gross profit - fixed cost
What is break even point ?
When the revenue is equal to total cost
What is the Formula of break even ?
Fixed cost divide (selling price - variable cost per unit )
What is the margin of safety
How much sales can fall before a business reaches its breakeven point
What the formula of margin of safety ?
Actual level of sales - break even point
3 benefits of calculating break even
Helps set targets
Allows the business to see how well it’s doing
Helps obtain a bank loan
What is gross profit
Is the profit the business makes after deducting costs associated with buying and selling the products
