AS Business Studies: Calculating Costs, Revenue and Profit

Hey, here are some revision notes for people taking the AQA AS Business Studies Unit 1 exam, but can be used for other exam boards too. I hope this helps you to revise! Please rate and comment on how to improve :D

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  • Created by: I P B
  • Created on: 18-11-10 11:58

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Page 1

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Calculating Costs,
Revenue and Profit

Page 2

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Specification


Calculating Costs, Candidates should
Revenues and Profits understand the
· fixed, variable and total relationships
costs between cost, price,
· price, total revenue revenue and profits.
and profit.

Page 3

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Profit
Profit is the return for taking a risk
Profit measures the success of an investment
Profit is an important source of finance



PROFIT = TOTAL SALES - TOTAL COSTS


The meaning and importance of profit
Profit is a surplus. It is the surplus of the value of sales made…

Page 4

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Sales
Revenue= the value of sales made during a trading period

TOTAL SALES = SELLING PRICE X NUMBER OF ITEMS SOLD

Various terms used!
­ Sales
­ Revenues
­ Income
­ Turnover
­ Takings

Sales arise through the trading activities of a business

Increasing Sales
There are three options!
1.…

Page 5

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Costs
Costs = these are expenditures made by a business as part of its trading operations

­ What it costs to produce the product or service?
­ What the cost of marketing the product is?
­ How high are the overheads of the business?
­ What the potential costs of…

Page 6

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Costs Continued
Variable Costs= costs that change directly with the level of output or sales

Variable costs are a lower risk for start-ups, because if there are no sales there are
no variable costs

Examples of variable costs
­ Raw materials
­ Bought-in stocks
­ Wages based on hours worked…

Page 7

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Exam Tips
An entrepreneur starting a new business often finds it hard to forecast sales, costs
and profits, especially if he/she has no experience of trading in the market. It is not
unusual for the initial assumptions made in a business plan to prove inaccurate, so
be careful about being…

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