money paid out by a business for the items it needs.
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examples of a start up cost?
buying and installing a sign, installing a cash register, and equipment.
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what is fixed and variable costs?
fixed costs stay the same no matter how many products the business makes or sells.variable costs change depending on the number of products made or sold.
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example of a fixed cost for someone who works in a workshop?
rent
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example of a variable cost for someone who works in a workshop?
paint
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what is a running cost?
the expenses a business has in it`s day-to-day operations.
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examples of a running cost?
ingredients and staff wages, utility bills for water, gas, and electricity.
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total cost equation
TOTAL COSTS = FIXED COSTS + VARIABLE COSTS
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variable cost equations
VARIABLE COSTS = COST OF ONE UNIT X NUMBER OF UNITS
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what is revenue?
the money a business receives
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revenue equation
REVENUE = NUMBER OF SALES X PRICE PER UNIT
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what is expenditure?
money the business pays out.
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examples of expenditure for a sweet shop?
wages for their assistance, rent, business rates, utility bills.
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what does stock mean?
bought by retailers for resale.
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what does consumables mean?
used by the business itself (e.g. paper for till receipts)
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what does raw materials mean?
used by manufactures to make a product.
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what does making a profit mean?
the business can grow which means that the owner can buy new equipment or open another outlet.
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what does making a loss mean?
this happens when expenditure is more than revenue. businesses that make losses often have to stop trading.
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profit equation
PROFIT = REVENUE - EXPENDITURE
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how can businesses increase their profit?
increasing their revenue and/or reducing their expenditure.
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what is break-even?
when revenue and expenditure are the same. there is no profit and no loss because the money thst the business has made through selling a product is equal to the cost of making the products
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what is the break-even chart?
can be drawn to show how much a business needs to sell to break even and how much it will need to make to start making a profit.
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what is on the break-even chart?
profit and loss, variable costs, total revenue, total costs, fixed costs, margin of safety and the break-even point.
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break-even equation
BREAKEVEN = FIXED COSTS ÷ SELLING PRICE PER UNIT - VARIABLE COST PER UNIT
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what is the purpose of budgeting?
to keep expenditure to a planned limit because if the expenditure is less than the revenue the business will make a profit.
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total sales revenue equation
TOTAL SALES REVENUE = NUMBER OF SALES X PRICE PER UNIT
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what is revenue budgeting?
the budget identifies sales targets and therefore revenue.
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what is expenditure budgets?
the budget also sets spending targets.
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profit equation
PROFIT = REVENUE - EXPENDITURE
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what is a cash flow forecast?
the money flowing in and out the business on a daily basis,
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what is inflow?
money received such as: bank loans, sales revenue, donations etc.
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what is outflow?
payments out such as: staff wages, advertising, insurance and business rates, stock or raw materials etc.
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what is cost of sales?
refers to the money it costs to make a product.
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gross profit equation
GROSS PROFIT = REVENUE - COST OF SALES
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what is gross profit?
how much money is left from selling an item after you have deducted the cost of making it.
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Other cards in this set
Card 2
Front
examples of a start up cost?
Back
buying and installing a sign, installing a cash register, and equipment.
Card 3
Front
what is fixed and variable costs?
Back
Card 4
Front
example of a fixed cost for someone who works in a workshop?
Back
Card 5
Front
example of a variable cost for someone who works in a workshop?
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