Revenue Costs and profit

• Revenue 


  is the money the business receives from its sales. 
• REVENUE = selling price x quantity sold
• Costs


  are the spending that a business has undertaken in order to make goods and provide services. 
• Fixed Costs


  are costs that stay the same regardless of output levels. For example, rent, business rates, salaries.
• Variable Costs


  are costs that change with the level of output. For example, raw materials, packaging, wages.
• TOTAL COSTS = fixed costs + total variable costs
• TOTAL VARIABLE COSTS = variable cost per unit x quantity sold
• PROFIT = total revenue – total costs
• Profit

  is the financial return or reward that the owners of a business aim to achieve. 
• If total revenue is greater than total costs, the business makes a profit.
• If total revenue is less than total costs, the business makes a loss.
• Interest


  refers to the cost of borrowing.
• INTEREST ON LOANS (%) = (total repayment – borrowed amount) / borrowed amount x 100 .

                                                      
• Break Even


  is the point where total revenue is equal to total costs, which means the business is not making a profit or a loss.
• BREAK-EVEN =          _______Fixed costs_______

            (Selling price - variable cost per unit)
• This information can be represented on a break-even diagram or graph and will show the potential profit or loss that could be made at different levels of output, as revenue and costs change.
• Margin of safety

  is the difference between its current level of output/sales and the break-even point. 
• MARGIN OF SAFETY = actual or budgeted sales – break even sales