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 on: 18-11-10 11:58
Preview of AS Business Studies: Calculating Costs, Revenue and Profit

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Calculating Costs,
Revenue and Profit

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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.…read more

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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 by a business over its
total costs of production.…read more

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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. Increasing quantity sold
­ Perhaps by cutting the price or offering volume-related incentives
­ Is demand sensitive to price?
2.…read more

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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 a business decision are? [remember opportunity
cost)
Costs are important because they...…read more

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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 or amount produced
­ Marketing costs based on sales (e.g.…read more

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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 too critical if this comes up in your BUSS1 case study.
Setting the price for a new product is particularly difficult. Many factors influence
the price that customers are prepared to pay.…read more

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