Business Learning Outcome 2

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  • Created by: RHunwicke
  • Created on: 09-01-22 16:54
What are Costs?
Costs are the things businesses have to pay for in order to produce a product or service.
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What are Fixed Costs?
Fixed costs are things a business pays for that do not change depending on the amount of a product a business makes.
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Examples of Fixed Costs
-Rent
-Insurance
-Staff wages
-Advertising
-Loan repayments
-Utilities
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What are Variable Costs?
Variable costs are the costs a business pays that depends on how many products a business produces.
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Examples of Variable Costs
-Raw material
-Stock
-Packaging
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How are Total Costs Calculated?
Total Costs=Fixed Costs+(Variable Cost per unit x Units Produced)
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What is Revenue?
Revenue is the money generated from selling products or services.
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How is Total Revenue Calculated?
Revenue=Selling Price x Number of Sales
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What is Profit?
Profit is the money left over from revenue once costs have been paid.
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How is Total Profit Calculated?
Total Costs=Total Revenue-Total Costs
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What is Profit per Unit?
Profit per Unit is the amount of profit a business makes on just one item sold
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How is Profit per Unit Calculated?
Profit per Unit=Selling Price per Unit-Total Costs per Unit
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What is Break-Even?
Break-Even is the point at which a business does not make a profit or a loss-its revenue from sales and its total costs are equal.
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How is Break-Even Calculated?
Break-Even=Fixed Costs/(Selling Price per Unit-Variable Costs per Unit)
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Why is Break-Even Useful for a Business?
They know what sales they need in order to be profitable; so, they know how many products to produce.
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What does Increasing Selling Prices do to the Break-Even Point?
Increasing selling prices will lower a business' Break-Even point.
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What Impact does Increased Costs have on the Break-Even Point?
Increase in either fixed costs and/or variable costs will result in a higher Break-Even point.
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Other cards in this set

Card 2

Front

What are Fixed Costs?

Back

Fixed costs are things a business pays for that do not change depending on the amount of a product a business makes.

Card 3

Front

Examples of Fixed Costs

Back

Preview of the front of card 3

Card 4

Front

What are Variable Costs?

Back

Preview of the front of card 4

Card 5

Front

Examples of Variable Costs

Back

Preview of the front of card 5
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