finance 3.5

Subdecks (5)

where does revenue come from?
the trading activities of a business
costs
the expenditure a firm makes as part of its trading
fixed costs
costs that do not change directly with the level of output
variable costs
costs that change directly with output.
they will increase by a set amount a new unit is made
fixed costs examples
rent and rates
salaries
advertising
variable costs
raw materials
wages based on hours worked
bought in stocks
how to calculate total costs
total fixed costs + total variable costs
how to calculate total variable costs
variable cost per unit X no of units
unit costs
the costs of producing one unit of output
how to calculate unit costs
total costs divided by units of output
profit
surplus achieved when total revenue from sales is higher than the total costs of a business
how to calculate profit?
total revenue - total costs
loss
shortfall suffered when total revenue from sales is lower than the total costs of a business
gross profit
the amount of profit left after the cost of producing the goods or service is taken away from the sales revenue
how to calculate gross profit?
sales revenue - costs of goods sold
operating profit
the profit left after all fixed and variable costs have been deducted from revenue
how to calculate operating profit?
gross profit - operating expenses
profit for the year
the profit once all the costs have been paid