Component 1 - Business Revenue and Costs

Question 1

Explain : What is meant by revenue, costs and profit

Answer 1

Revenue - The total income a business generates through the sale of its products or services.

Costs - Costs refer to the expenses a business incurs in order to generate revenue.

Profit - Profit is the difference between a business’s revenue and its costs.

Question 2

Explain : interpret revenue, costs and profit calculations

Answer 2

Revenue - Sales X selling price

Profit - Revenue - Costs

Question 3

Explain : Costs to a business, including;

• fixed,
• variable,
• semi-variable,
• direct,
• indirect/overhead costs
• total costs

Answer 3

Costs

Fixed - Costs that do not vary with the level of production or sales. Examples include rent, salaries, and insurance.

Variable - These are costs that vary directly with the level of production or sales, E.G Cost of sales.

Semi-variable -These are costs that have both a fixed and variable component. For example, a utility bill may have a fixed monthly charge plus a variable charge based on usage.

Direct - These are costs that can be directly traced to a specific product or service. Examples include the cost of raw materials and direct labor.

indirect/overhead - These are costs that cannot be directly traced to a specific product or service. Examples include rent, utilities, and office supplies.

Total costs - The sum of all the costs incurred by the business, including both fixed, variable, semi-variable, direct and indirect/overhead costs.

Question 4

Explain : what is meant by contribution

Answer 4

Contribution - The amount of revenue that a business generates from a product or service that exceeds the variable costs of producing and selling that product or service.

Question 5

Explain : Construct and interpret break-even charts,
including the margin of safety

Answer 5

Do on Paint.

Question 6

Explain : illustrate on a break-even chart the effects of
changes in costs and revenue

Answer 6

Do on paint.

Question 7

Evaluate : Impact of revenue, costs and profit on a business
+ Stakeholders

Answer 7

Do on word

Question 8

Evaluate : how changes in costs and/or revenue can affect break-even

Answer 8

Do on word

Question 9

Evaluate : The usefulness of break-even to a business and
+ stakeholders”

Answer 9

Do on word

Question 10

Calculate : Contribution and understand
its application to the calculation of break-even

Answer 10

Contribution = Total sales revenue - Variable costs .
Contribution per unit = Selling price per unit x variable cost per unit .