Sales, Revenue and Costs (2.2.2) Flashcards
What is Sales Volume?
The number of units sold by a business
What is Sales Revenue?
The value of the units sold by a business. It’s a key business performance measure and must be calculated to identify profit
What is the equation for sales revenue?
Sales Revenue= Selling Price x number of units sold
What usually happens to the Sales Revenue if the Sales Volume increases?
The Sales Revenue also increases as the more the business sells the more revenue the business gets
What are Fixed Costs?
Fixed Costs are costs that don’t change as your OUTPUT increases. These have to be paid no matter the output of the business
What are Variable Costs?
Costs that change as your OUTPUT increases.
What’s the equation for Revenue?
Revenue=Price x Quantity
What’s the equation for Total Costs?
Total Costs=Variable Costs + Fixed Costs
What’s the equation for Profit?
Profit=Revenue- Total Costs
What’s the equation for Sales Volume?
Sales Volume= Sales Revenue/ Sales Price
What’s the equation for Total Variable Cost?
Total Variable Cost= Variable Cost x Quantity
What are the three ways of increasing profit?
-Raising the price
-Reducing Fixed Costs
-Reducing Variable Costs
How can a business increase their profit by raising the price?
Higher prices will mean more revenue will be achieved per sale. It does however depend on PED as consumers may switch to cheaper brands.
How can a business increase their profit by Reducing Fixed Costs?
Cheaper rent or less salaried workers could lower total costs. Depends on damage this does to footfall or levels of customer service
How can a business increase their profit by Reducing Variable Costs?
Cost of producing product will be lower, increasing profit margin per unit. Depends on damage it does to the quality of the product/service.
