Chapter 31- Sales, Revenue and Costs

Question 1

Sales revenue

Answer 1

value of output sold by a business – calculated through

=price x Quantity of output

Question 2

Average Cost

Answer 2

the cost of producing one unit, calculated by dividing the total cost by the output

= Total cost/output

Question 3

Fixed Cost

Answer 3

A cost that doesn’t change as a result of output – e.g. rent, insurance, heating bills, depreciation and business rates – the costs remain the same whether a business produced nothing or is working at full capacity

e.g. Cost of operating

Question 4

Long Run

Answer 4

the time period where all factors of production are variable

Question 5

Semi Variable Cost

Answer 5

a cost that consists of both fixed and variable elements

Question 6

Variable Cost

Answer 6

a cost that rises as output rises – e.g. a baker will require more flour if more loaves are to be produced

e.g. Cost of sales

Question 7

Total cost

Answer 7

If fixed and variable costs are added together, they show the total cost of a business – the total cost of production is the cost of producing any given level of output

= Fixed cost + Variable cost

Question 8

Profit

Answer 8

Profit is the difference between revenue and costs

= total revenue – total costs

Question 9

Contribution

Answer 9

Contribution looks at the profit made on individual products. It is used in calculating how many items need to be sold to cover all the business’ costs (variable and fixed).

Selling price - Variable cost per unit

Question 10

Cost of sales

Answer 10

This would include the cost of raw materials, components, goods bought for resale and the direct labour costs of production. This is a variable cost as greater output = greater cost of resources.

Question 11

Finance expenses

Answer 11

Interest paid on bank and other borrowings, less interest income received on cash balances