Money needed to start a business before it can begin trading. E.g. cash register, sign, oven, chair.
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What are operation/running costs?
The money/expences payed out during the day to day running of a business. E.g. wages, water, gas, electricity.
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what are fixed costs?
Fixed costs stay the same no matter how many products the business makes or sells. E.g. rent or insurance.
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What are variable costs?
Variable costs change depending on the number of products made or sold. E.g. hotdogs, bread. Variable costs= cost of 1 unit x Number of units.
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What are total costs?
Costs for the business. Total costs= fixed costs+variable costs.
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Name some revenue sources.
Sales. services. selling assets.
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What is revenue?
Amount of money a business receives. Revenue= Number of sales X price per unit.
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Types of expenditure.
Wages, rent, rates, utility bills,. Over heads are every day running costs.
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How to calculate profit?
Profit = Revenue - Expenditure
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Break even calculation.
Fixed costs over (selling price per unit - variable cost per unit) See book for extra detail.
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Benifits of break even analysis.
The business knows the fixed costs and variable costs linked to a product. The business can analyse costs and see if any are too high and can be reduced. The business can set the optimum (best) price for a product.
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Other benifits of break even analysis.
The business can calculate and forcast potential sales revenue. It allows the business to set a margin of safety.
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Risks of egnoring break even analysis.
The business does not know the costs of production and running costs. The cost stock or raw materials may be too high. The selling price may be too high too low or not cover costs.
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Calculating total sales revenue.
Total sales revenue = Number of sales X price per unit.
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Calculating net inflow/outflow
inflows - outflows.
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calculating gross profit.
Gross profit = revenue - cost of sales.
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calculating net profit.
Net profit= gross profit - expenditure.
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Other cards in this set
Card 2
Front
What are operation/running costs?
Back
The money/expences payed out during the day to day running of a business. E.g. wages, water, gas, electricity.
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