Calculating Costs, Revenues, and Profits
Types Of Cost
There are two types of costs a business has to be aware of, these are: fixed and variable.
Fixed Costs- Fixed Costs are costs that do not change in relation to output e.g. salary or rent.
Variable Costs- Variable Costs are costs that do change in relation to output e.g. wage or raw materials.
When it comes to working out total costs, you have to add the total fixed costs to the total variable costs.
Revenue
Revenue or turnover the income that a company receives from its normal business activities, usually from the sale of goods and services to customers and is worked out by multiplying the amount of products sold by the selling price e.g. 100 chocolate bars sold at £1 would mean revenue would be £100.
If you want to increase revenue, one way is to reduce costs per item. The reduction in costs means you are able to sell your product at a lower price which may seem more appealing to the customer meaning that the quantity of products sold may increase.
Profit
Profit is the money left over after the reduction of total costs. This is figured out by subtracting total costs from the total revenue e.g. if a business' revenue is £500 and total costs add up to £300, there would be a total of £200 profit for the business.
There are two types of costs a business has to be aware of, these are: fixed and variable.
Fixed Costs- Fixed Costs are costs that do not change in relation to output e.g. salary or rent.
Variable Costs- Variable Costs are costs that do change in relation to output e.g. wage or raw materials.
When it comes to working out total costs, you have to add the total fixed costs to the total variable costs.
Revenue
Revenue or turnover the income that a company receives from its normal business activities, usually from the sale of goods and services to customers and is worked out by multiplying the amount of products sold by the selling price e.g. 100 chocolate bars sold at £1 would mean revenue would be £100.
If you want to increase revenue, one way is to reduce costs per item. The reduction in costs means you are able to sell your product at a lower price which may seem more appealing to the customer meaning that the quantity of products sold may increase.
Profit
Profit is the money left over after the reduction of total costs. This is figured out by subtracting total costs from the total revenue e.g. if a business' revenue is £500 and total costs add up to £300, there would be a total of £200 profit for the business.