Revenue, Costs and Profit Flashcards

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What is revenue (also called turnover)?

The money a business earns from selling its goods or services.

Total revenue = price per unit x quantity sold.

Sales volume is the number of units sold. Sales revenue is the money made from those sales.

Costs that do not change with output, such as rent or business rates.

Costs that change with output, such as raw materials or packaging.

Total variable cost = variable cost per unit x number of units.

Total costs = fixed costs + total variable costs.

Profit = total revenue – total costs.

A loss happens when total costs are greater than total revenue.

Average unit cost = total costs / number of units produced.

Gross profit is revenue minus cost of sales (direct costs of making or buying the goods sold). Net profit is gross profit minus all other costs.

Revenue = 120 x £8 = £960. Variable cost = 120 x £3 = £360. Total cost = £360 + £200 = £560. Profit = £960 – £560 = £400.