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Formula list for
AS Business Studies
Percentage change = (new old) / old x 100 or difference / old x 100 where old is the previous
value and new is the current value.
Example: calculate the percentage increase if sales revenue increases from £120m to £150m.
Percentage increase in sales revenue = (150120)/120 x 100 = 30/120 x 100 = 0.25 x 100 = 25%
Revenue: income earned from selling products. Sometimes called sales, sales revenue or turnover.
Total revenue is found by multiplying selling price per item by the quantity (amount) of items sold.
Revenue = price x quantity or TR = P x Q where TR is total revenue, P is price and Q is quantity
Example: calculate total revenue if 2,000 items priced £30 each are sold. TR = £30 x 2,000 = £60,000
Total cost, fixed cost and variable cost
Costs: the expenses involved in making a product. Firms incur costs by trading.
Total Costs (TC): the amount of money spent by a firm on producing a given level of output. Total
costs are made up of fixed costs (FC) and variable costs (VC).
Fixed costs: expenses of production that do not change with output eg rent. Fixed costs are almost
always indirect costs and are sometimes called overheads.
Variable costs: expenses of production that do change with output eg components and raw materials.
Variable costs are almost always direct costs.
Total costs = Fixed Costs + Variable Costs or TC = FC + VC. This means FC = TC VC and VC = TC FC
Example: calculate total costs if fixed costs are £10,000 and variable costs are £40,000.
TC = FC + VC = £10,000 + £40,000 = £50,000
Average cost and variable cost per unit
Average cost (AC) or unit cost is the cost of producing one item. Average cost is found by dividing
total costs (TC) by total output (Q).
Average costs = Total Cost / Output or AC = TC/Q
Example: calculate unit cost if the total cost of making 2,000 products is £50,000.
AC = TC/Q = £50,000/2,000 = £25. The unit or average cost of making one product is £25.
Variable cost per unit or average variable cost (AVC): the cost of making one item ignoring fixed
costs and is found by dividing variable cost by the level of output. AVC = VC / Q
Example: calculate unit variable cost if variable cost of making 2,000 products is £40,000.
AVC = VC/Q = £40,000/2,000 = £20. The unit variable cost of making one item is £20.
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Mark up is found by adding a given percentage to the initial unit cost
Example: calculate the selling price of an item where unit cost = £5 and mark up is 200%. The selling
price = unit cost + (unit cost x mark up) = £5 + (£5 x 200%) = £5 + £10 = £15
Put simply profit is the surplus left over from revenue after paying all costs. Profit is found by
deducting total costs from revenue.…read more
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Payback: the time taken to recover the sum of money invested.
Example: a new machine costs £10,000 and is expected to increase returns by £2,500 a year. The
payback period needed to recover money spent is four years.
Where payback occurs sometime during a year the following formula is used:
Month of payback = target income/income per month
Example: new equipment costing £12,000 generates £3,600 income each year. Three years generates
£10,800 income. Payback is sometime during year four.…read more
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Market Size, share and growth
Market size: total sales of all the firms in a given market. Market size by value is found by multiplying
the number of units sold by price
Example: Firm A sells 2,000 units at £8. Firm B sells 2,500 units at £5.…read more