Revenue Cost & Profit Flashcards
revenue
Money a business makes from sales.
Total revenue = quantity sold x selling price
profit
The amount left after a business subtracts total costs from the revenue they generate from selling products to customers.
Profit = Total Revenue - Total Costs
fixed costs
Costs that do not vary with output and only change in the long run E.g rent and insurance
variable costs
Costs that change in direct proportion to changes in output.
E.g raw materials, stock
semi-variable costs
Costs that include both fixed- and variable-cost components.
E.g overtime for employees on a salary
direct costs
Costs that can be identified directly with the production of a good or service.
E.g. raw materials.
indirect costs (overheads)
Costs which cannot be matched against each product because they need to be paid whether or not the production of goods or services takes place, e.g. rent
total costs
Total costs = Total fixed costs + total variable costs.
contribution
Contribution = Selling price - variable cost per unit.
This allows an organisation to analyse whether each of its products covers its own variable costs.
break even chart
A diagram that shows the level of output where a business does not make a profit nor a loss. Break even output = Fixed Costs / Contribution (Selling Price - Variable Cost per unit)
margin of safety
Shows how much a producer can reduce output before the business starts to make a loss.
Margin of safety = Actual output - Break-even output.
Gross profit margin
Gross profit/sales revenue x 100
Net profit margin
Net profit/sales revenue x 100
Net cash flow
cash inflows – cash outflows
Labour productivity
Total output per period of time/Average number of employees per period of time
Labour turnover
Number of staff leaving/Average number of staff employed x100
Gross profit
Sales - cost of sales
Net profit
Gross profit - expenses
Break even
Fixed costs / contribution
