business revenues, costs and profits

• • variable costs:
  • costs that vary as output varies, e.g raw materials, electricity
• • Fixed costs 

  • Cost that don’t vary just because output varies, e.g rent, wages etc
• Total costs CALCULATION


  adding fixed costs to variable costs

  if revenue is higher, then profit is made but if total costs are higher than revenue, the firm is making a loss
• • Interest 
Charges made by banks for cash they have lent to a business, e.g 6% per year
• • to find interest amount
  • debt x interest rate/100
  • e.g £5000 x 10/100 = £500
• • profit: 

  • The difference between revenue and total costs. If the figure is negative, the business is making a loss
• • profit CALCULATION 
profit = total revenue - total costs
• • break even: The level of sales at which total costs are equal to tal revenue. At this point the business is neither making profit nor loss

• • break even output
  • break even output = fixed costs/(selling price - variable cost per unit)
• • sales forecasts:
  • the business‘s predictions of how much they will sell in a future time period
• Revenue:

  • the total value of sales made within a set time period,such as a month.
  • revenue=quanity of product x selling price
  • revenue is the money made from selling the products ONLY
• Margin of safety:

  • How much the business can allow sales to fall before the business starts making loss
  • margin of safety=
current sales - break-even output
• Interpretation of break-even diagrams:

  ● the impact of changes in revenue and costs

  ●break-even level of output

  ● margin of safety

  ● profit and loss.

  (YOU need to know how to do this and interpret graphs etc.)