Revenue, Cost and Profit Flashcards
What is Revenue?
The income earned by a business
How do Businesses earn most of their income?
From selling products to customers
How is Revenue calculated?
Revenue = Quantity sold x price
What are costs?
The expenses paid out to run a business
What is fixed cost?
Stays the same no matter how much the business produces
Examples of fixed cost
- Rent
- insurance
- advertising
- Salaries of employees
What is Variable cost?
Are the costs that will increase as the firm expands output
Examples of Variable cost
- Raw Materials
- Factory Labour
How is Total Variable cost calculated?
Total Variable cost = quantity sold x variable cost per unit
How is Total cost calculated?
Total cost = Total variable cost + Total fixed costs
When a business borrows money what will it usually have to pay it back with?
Interest
How is Interest calculated?
Total repayment - borrowed amount
——————————————— x 100
borrowed amount
How to calculate Profit?
Profit = Revenue - costs
