Sales, Revenue and Costs (2.2.2)

Question 1

What are Fixed Costs?

Answer 1

Fixed Costs are costs that don’t change as your OUTPUT increases.

Question 2

What are Variable Costs?

Answer 2

Costs that change as your OUTPUT increases.

Question 3

What’s the equation for Revenue?

Answer 3

Revenue=Price x Quantity

Question 4

What’s the equation for Total Costs?

Answer 4

Total Costs=Variable Costs + Fixed Costs

Question 5

What’s the equation for Profit?

Answer 5

Profit=Revenue- Total Costs

Question 6

What’s the equation for Sales Volume?

Answer 6

Sales Volume= Sales Revenue/ Sales Price

Question 7

What’s the equation for Total Variable Cost?

Answer 7

Total Variable Cost= Variable Cost x Quantity

Question 8

What are the three ways of increasing profit?

Answer 8

-Raising the price
-Reducing Fixed Costs
-Reducing Variable Costs

Question 9

How can a business increase their profit by raising the price?

Answer 9

Higher prices will mean more revenue will be achieved per sale. It does however depend on PED as consumers may switch to cheaper brands.

Question 10

How can a business increase their profit by Reducing Fixed Costs?

Answer 10

Cheaper rent or less salaried workers could lower total costs. Depends on damage this does to footfall or levels of customer service

Question 11

How can a business increase their profit by Reducing Variable Costs?

Answer 11

Cost of producing product will be lower, increasing profit margin per unit. Depends on damage it does to the quality of the product/service.

Question 12

What is Profit used for?

Answer 12

-Pay Shareholders
-Reinvest it on expansion
-Save it for later (Retained Profit)