5.3 Revenue, Costs, Profit, and Loss

• What is revenue in business terms?

  Total income from sales
• Profit is defined as earnings after expenses are deducted.


  True
• Steps to apply revenue, costs, profit, and loss concepts to a case study

  1️⃣ Define business operations

  2️⃣ Identify fixed and variable costs

  3️⃣ Calculate total costs

  4️⃣ Determine revenue

  5️⃣ Calculate profit or loss
• Revenue is the total income from sales
• Variable costs change directly with the level of output
• Fixed costs do not change with the level of output or sales
• Variable costs change directly with the level of output or sales
• To calculate total costs, add fixed costs and variable costs
• Profit is calculated by subtracting total costs from total revenue.

  True
• Businesses need to understand three main types of costs: fixed, variable, and total
• A business incurs a loss when its costs exceed its revenue
• Revenue is a key metric for measuring financial performance and growth.


  True
• What is profit defined as in business terms?

  Earnings after expenses
• What remains constant regardless of output level in a business?

  Fixed costs
• Fixed costs remain the same regardless of how much a business produces.


  True
• Total costs are the sum of fixed and variable costs
• If fixed costs are £10,000 and variable costs are £5,000, the total costs are £15,000.

  True
• Revenue represents the total amount of money a business receives from selling goods or services
• Order the three main types of business costs from most to least influenced by output:

  1️⃣ Variable Costs

  2️⃣ Total Costs

  3️⃣ Fixed Costs
• The formula to calculate total costs is Fixed Costs + Variable Costs.


  True
• What type of costs increase as production rises?

  Variable Costs
• What formula is used to calculate profit?

  Profit = Revenue - Total Costs
• How is profit calculated if revenue is £50,000, fixed costs are £20,000, and variable costs are £15,000?

  Profit = 50,000 - 35,000
• What is the formula for calculating a loss?

  Loss = Total Costs - Total Revenue
• What is revenue defined as?

  Total income from sales
• What is the formula for calculating total costs?

  Total Costs = Fixed Costs + Variable Costs
• The formula for total costs is: Total Costs = Fixed Costs + Variable Costs
• Revenue is the total money received from sales
• Total costs include both fixed and variable costs
• The break-even point is the level of sales where total revenue equals total costs
• In the Sweet Bites bakery case study, what were the total costs?

  £5,000
• If a business has revenue of £50,000, fixed costs of £20,000, and variable costs of £15,000, what is the profit?

  £15,000
• If a clothing store sells £50,000 worth of clothing, its revenue is £50,000.

  True
• If fixed costs are £10,000 and variable costs are £5,000, what are the total costs?

  £15,000
• Fixed costs are costs that do not change with the level of output
• Profit is the surplus income after deducting all expenses
• If a business has revenue of £50,000 and total costs of £35,000, the profit is £15,000
• To calculate a loss, subtract total revenue
• The break-even point in units is calculated as fixed costs divided by selling price per unit minus variable cost per unit
• Variable costs increase as production increases.

  True