Measurement and importance of profit

• How do you calculate revenue?

  Revenue = Selling price x Quantity sold
• What is the revenue if 1000 burgers are sold at £4 each?

  £4,000
• What might a business do to increase its revenue?

  Increase selling price or quantity sold
• What are variable costs in this context?

  Costs that vary with production volume
• How do you calculate total profit or loss?

  Profit = Revenue - (Fixed costs + Variable costs)
• What is the total profit/loss if revenue is £4,000, fixed costs are £6,000, and variable costs are £6,000?

  -£8,000 loss
• What is the formula for profit?

  Profit = (P x Q) - (FC + VC)
• What are the ways to increase profit according to the golden formula?

  • Increase selling price
  • Increase quantity sold
  • Decrease fixed costs
  • Decrease variable costs
• What could McDonald's do to improve their profit?

  Increase price of Big Mac
• What is one way to decrease variable costs?

  Use cheaper potatoes for chips
• What is the formula to work out variable costs?

  Variable costs = Variable cost per unit x Quantity sold
• What are examples of fixed costs mentioned?

  Rent, Heating, Salaries, Insurance
• What are examples of variable costs mentioned?

  Raw materials, wages, packaging, delivery costs
• How can a business lower its costs?

  By reducing variable costs per unit