Revenue, Costs and Profit Flashcards
What is revenue?
The money a business makes from sales
How do you calculate revenue?
Selling price per unit x quantity of units sold
What does revenue affect? 2 points
Sales volume and price
What are fixed costs?
Costs that dont change with output
What are 2 examples of fixed costs?
Rent and basic salaries
What are variable costs?
Costs that change with output
What are 2 examples of variable costs?
Hourly wages, raw material costs
How do you calculate total variable costs?
Variable cost per unit x number of units sold
What is an example of semi-variable costs?
Telephone bills
How do you calculate total costs?
Fixed costs + Variable costs
What is profit?
The difference between revenue and costs
How do you calculate profit?
Total revenue - total costs
What 3 things can businesses do with profit?
Reinvest
Give to shareholders as dividends
Give to charity
How does large-scale production help costs keep low?
The fixed costs are shared out between more items
What do businesses use costs information to set?
Selling price of products and services
What does it mean if a business is a ‘price taker’ in a very competitive market?
Doesnt have control over selling price
Why do businesses set budgets?
To forecast how much costs are going to be over a year.
What are 3 reasons why profit is important?
Motivate people
Good source of finance
Used to attract investors
