Revenue, costs and break-even

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  • Breakeven, cash flow and revenue
    • Sales revenue = Quantity sold x Selling price
      • Factors that affect sales: The number of competitors, What competitors do, whether the product is a necessity and how much people are willing to pay on the product.
      • To increase sales a business could - increase advertising - sell in more outlets - increase its product range
    • Business costs
      • Fixed costs
      • Variable costs = Quantity sold x Variable cost per unit
      • Total costs = Total fixed costs + Total variable costs
      • Average costs = Total cost divided by Amount sold
    • Break even analysis
      • Margin of safety = Actual sales - Break even sales
      • Break even output = Total fixed costs divided by (selling price - variable costs)
    • Key Words
      • Price elasticity of demand = A measure of the change in the level of demand caused by a change in a price
      • Short run = A period of time approximately 12 months in length
      • Long run = A period of time usually in excess of two years
      • Margin of safety = The amount by which a business' actual output is greater than its break even output

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