A-Level AQA Business Revision Unit 1 (Part 2) : Revenue, Costs & Profits
There are several costs that can be applied to a business.
This expenditure can come from:
- Tax -Electricity -Raw materials -Rent -Employees -Equipment -Furniture -Facilities -Advertising - Packaging -Ingredients
Fixed Costs - As output increases, costs stay the same
= The cost does not vary with the number of products made
Variable Costs - As output increases, costs increase
= The costs change with the number of products made.
Total Costs - All the costs of the business added together
Costs - Expenditure from a business as part of its trading operations
Revenue - money that arises through the sale of the business' products.
Money from the revenue generated is paid to workers, used for rent etc. The expenditure is taken from the revenue.
Revenue is vital for a business' survival. A constant flow of money is needed to secure survival and pay costs.
Profit - The amount of money left after total costs has been taken away from total revenue.
Profit shows that a business has been successful. If a business is able to gain profit, it is surviving and competing well within the market.
Profit loss - When the expenditure of the business is greater than the revenue generated.
If a business is making profit loss, they are struggling. They are failing to pay their costs, and if the matter is not addressed, the business could become insolvent.
Revenue Formula
Total sales = Quantity of products sold x Selling price
Total Costs Formula
Total costs = Fixed costs + Variable costs
Profit Formula
Profit = Total revenue - Total costs
