2.2.2 Sales, revenue and costs

• What is sales volume?

  Total number of units sold

  Sales volume = sales revenue/ price
• What is sales revenue?

  Value of the units sold

  Sales revenue = selling price x number of units sold (quantity)
• Sales revenue = selling price x number of units sold (quantity)
• Sales revenue normally increases as the sales volume increases.
• What are fixed costs?

  Costs that do not change as the level of output changes (production or sales).

  e.g building rent, management salaries, insurance, bank loan repayments
• What are variable costs?

  Costs that vary/change with the level of output (production or sales).

  e.g raw material costs, wages of workers directly involved in the production
• What are total costs?

  The sum of fixed costs and variable costs.
• What is a semi-variable cost?

  Cost with both fixed and variable components.
• Total cost = total variable cost + total fixed cost

  TC = VC + FC
• Total variable cost = variable cost x quantity
• Average total cost = total cost/quantity
• Variable cost per unit = total variable cost/ quantity