sales, revenue & costs Flashcards
what is sales revenue?
value of the units sold
why must sales revenue be calculated?
to identify profit
what is the formula for sales revenue?
selling price x number of units sold
what usually happens to revenue when sales volume increase?
it increases
what can make calculating the sales revenue easier when there is more than one product?
computer systems
what are fixed costs (FC)?
costs that do not change as the level of output changes
what are variable costs (VC)
costs that vary with the output
what happens to the variable cost when output increases?
it increases (vice versa)
what is the total cost?
the sum of the fixed costs and total variable costs
how do you calculate the total costs?
total fixed costs + total variable costs
how do you calculate the variable costs?
variable costs per unit x quantity
how do you calculate the average total costs (unit cost)?
total costs / quantity
how do you calculate the variable costs per unit?
total variable costs / quanity
how are variable costs calculated?
by adding together the cost of each component or raw material used to produce the unit
what is the relationship between a rise in cost and the output initially?
proportional with output
why will the relationship between cost and output no longer be proportional over time?
firms will be purchasing in economy of scale (bulk buying)
why can the total costs never be 0?
all firms have some level of fixed costs
what can a firm do when it grows?
increase scale of output
what does increasing the scale of output mean for a firm?
generates efficiencies that lower its average total costs of production
what are the efficiencies also known as?
economies of scale
what happens is a firm continues increasing its scale of output?
average total costs will begin to increase
what is the reason for an increase in average costs?
diseconomies of scale
what is diseconomies of scale?
an increase in scale of output results in higher costs per unit
what is contribution?
a products selling price minus the variable costs directly involves in producing that unit
