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Theme 1: Investigating Small Business
1.3 Putting a Business Idea into Practice
1.3.2 Business Revenues, Costs, and Profits
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Fixed costs change with the level of output.
False
Match the cost type with its example:
Fixed Costs ↔️ Rent, insurance
Variable Costs ↔️ Raw materials, wages
Semi-Variable Costs ↔️ Utility bills
What is the formula for calculating total costs?
Fixed\ Costs + Variable\ Costs</latex>
Fixed costs do not change with the level of
output
.
True
What are fixed costs in business terms?
Costs that do not change
Variable Costs increase as production levels change.
True
What is the formula for Average Costs?
A
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Average\ Costs =
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\frac{Total\ Costs}{Number\ of\ Units\ Produced}
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The formula for profit is **Profit = Revenue -
Costs
**
Match the profit type with its definition and formula:
Gross Profit ↔️ Revenue after deducting COGS |||
G
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Gross\ Profit =
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C
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Revenue - COGS
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−
COGS
Net Profit ↔️ Revenue after deducting all expenses |||
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Net\ Profit =
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Gross\ Profit - All\ Other\ Expenses
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ross
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A
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Understanding the relationship between revenue, fixed costs, and variable costs is crucial for maximizing
profitability
.
True
What is the definition of business revenues?
Income from selling goods
What do business revenues refer to?
Total money from sales
Variable costs increase or decrease as production levels
change
What is the formula for calculating average costs?
T
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\frac{Total\ Costs}{Number\ of\ Units\ Produced}
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Match the cost type with its characteristic:
Fixed Costs ↔️ Constant regardless of production
Variable Costs ↔️ Changes with production
What are variable costs in business terms?
Costs that change with production
Average Costs
are calculated by dividing the
Total Costs
by the number of units
produced
What does revenue represent in a business?
Total income from sales
What is the formula for profit in simple terms?
P
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Profit =
P
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=
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−
C
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Revenue - Costs
R
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−
C
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s
Match the business cost type with its definition and example:
Fixed Costs ↔️ Costs that do not change with output ||| Rent, insurance, administrative salaries
Variable Costs ↔️ Costs that change directly with output ||| Raw materials, packaging, production wages
Semi-Variable Costs ↔️ Costs with fixed and variable components ||| Utility bills (base charge plus usage)
Fixed costs change with the level of output.
False
What is an example of a fixed cost for a business?
Rent
What is the formula for calculating average costs?
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\frac{Total Costs}{Number\ of\ Units\ Produced}
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Match the profit type with its definition:
Gross Profit ↔️ Revenue after deducting COGS
Net Profit ↔️ Revenue after deducting all expenses
Net profit indicates a business's financial performance after covering all
expenses
.
True
Variable costs change directly with the level of
output
Fixed costs
remain constant even if the business doesn't produce anything.
True
Average costs are calculated by dividing total costs by the number of units
produced
Variable costs change directly with the level of
output
Fixed Costs
remain constant even if the business doesn't produce
anything
Steps to calculate Total Costs
1️⃣ Identify Fixed Costs
2️⃣ Identify Variable Costs
3️⃣ Add Fixed Costs and Variable Costs
Understanding the relationship between fixed, variable, and
total costs
is crucial for effective cost management.
True
Profit is calculated by subtracting costs from
revenue
.
True
If a company has
Revenue
of $100,000 and
Expenses
of $60,000, its
Profit
is $
40,000
What are fixed costs in the context of profit and loss analysis?
Costs that do not change
Business revenues can come from sources such as product sales and service
delivery
Understanding cost types helps businesses make informed decisions about pricing, production, and resource
allocation
Total costs are calculated by summing fixed costs and variable
costs
What is the formula for calculating profit?
P
r
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f
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t
=
Profit =
P
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=
B
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B
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Business Revenues - Business Costs
B
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in
ess
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B
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What does COGS stand for?
Cost of Goods Sold
See all 45 cards
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