Chapter 31- Sales, Revenue and Costs Flashcards
Sales revenue
value of output sold by a business – calculated through
=price x Quantity of output
Average Cost
the cost of producing one unit, calculated by dividing the total cost by the output
= Total cost/output
Fixed Cost
A cost that doesn’t change as a result of output – e.g. rent, insurance, heating bills, depreciation and business rates – the costs remain the same whether a business produced nothing or is working at full capacity
e.g. Cost of operating
Long Run
the time period where all factors of production are variable
Semi Variable Cost
a cost that consists of both fixed and variable elements
Variable Cost
a cost that rises as output rises – e.g. a baker will require more flour if more loaves are to be produced
e.g. Cost of sales
Total cost
If fixed and variable costs are added together, they show the total cost of a business – the total cost of production is the cost of producing any given level of output
= Fixed cost + Variable cost
Profit
Profit is the difference between revenue and costs
= total revenue – total costs
Contribution
Contribution looks at the profit made on individual products. It is used in calculating how many items need to be sold to cover all the business’ costs (variable and fixed).
Selling price - Variable cost per unit
Cost of sales
This would include the cost of raw materials, components, goods bought for resale and the direct labour costs of production. This is a variable cost as greater output = greater cost of resources.
Finance expenses
Interest paid on bank and other borrowings, less interest income received on cash balances