Sales, Revenue, Costs Flashcards
What is revenue?
The value of total sales made by a business within a period, usually one year
What are costs?
Expenses incurred by a firm in producing and selling its products, such as wages and raw materials
What is sales value?
The number of units sold
How to find sales revenue
Sales volume x price
How can entrepreneurs start their financial planning?
Assessing the revenue that they are likely to receive during the coming financial year
How can a firm seek to increase revenue?
Plan to sell more or aim to sell at a higher price
- some firms may maintain high prices even though this policy depresses sales
How can a firm boost revenue?
Change low prices in attempt to sell as many units as possible
- high sales volumes may lead to high revenues and profits
What makes variable pricing more common?
Online purchasing- allowing prices to rise and fall depending on demand and supply condition
Costs of production
Managers need to be aware of costs of all aspects of their business for a number of reasons
Reasons (cost of production)
- They need to know the cost of production to assess whether it is profitable to supply the market at the current price
- They need to know actual costs to allow comparisons with their forecasted figures
Fixed costs
Any costs that do not vary directly with the level of output
Fixed costs continue
- These costs are linked to time rather than to level of business activity
- They exist even if a business isn’t
producing any goods or services
Variable costs
Costs which vary directly with the level of output
Variable costs continue
- They represent payments made for the use of inputs such as labour, fuel, raw materials
- If a manufacturer doubled output, then these costs would double
Examples of variable costs
Raw materials
Packaging
Piece- rate labour
Commission (percentage on sales)
