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)
Examples of fixed costs
Rent
Heating and lighting
Salaries
Interest charges
Total costs
When added together, fixed costs and variable costs give the total costs for business
What is piece rate labour ?
Paying workers per item they make- that is without regular pay
What is sales revenue?
The number of units sold in a time period multiplied by the average selling price of those units
What is sales volume?
The number of units sold in a time period
