Cost, Revenue, Profit Flashcards Preview

10T - R064 Exam Revision COPY > Cost, Revenue, Profit > Flashcards

Flashcards in Cost, Revenue, Profit Deck (16)
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1
Q

What are the two types of costs for a business?

A

Fixed costs and Variable costs

2
Q

What is a fixed cost?

A

A cost which does not change

3
Q

What is a variable cost?

A

A cost which changes

4
Q

What is the formula for Total Cost?

A

Total Cost = Fixed Cost + Variable Cost

5
Q

What is meant by the term ‘break even’?

A

Where a businesses costs are equal to its revenue. The business is making 0.

6
Q

What is the formula for break even?

A

Break Even = Fixed Cost / (Selling Price - Variable Cost) Or Break Even = Fixed Cost / Contribution

7
Q

What is meant by the term contribution?

A

The difference between the selling price and variable cost per product. For example, if a product costs £1.00 to make (variable cost) and it is sold for £2.50 (selling price), the contribution would be £1.50. This money would count towards the businesses overall revenue (income).

8
Q

What is meant by the term revenue?

A

Finances generated though the sales of products/services.

9
Q

Rent, loan repayments, insurance, advertising, salaries and utilities are examples of what?

A

Fixed costs

10
Q

Raw materials, components, stock and packaging are examples of what?

A

Variable costs

11
Q

What is the formula for total revenue?

A

Revenue = Selling Price x Number of sales

12
Q

What does the blue line represent?

A

Fixed costs

13
Q

What does the green line represent?

A

Revenue

14
Q

What does the red line represent?

A

Total costs

15
Q

What is the break even output?

A

500

16
Q

If the business sold 800 products, what is the margin of safety?

A

300