Sales Revenue & Costs Flashcards

All 6 cards in this deck

What is the formula for sales revenue?

Revenue = selling price $\times$ quantity sold.

What is a fixed cost?

A cost that does not change with the level of output.
e.g. rent, insurance, salaries.

What is a variable cost?

A cost that changes directly with the level of output.
e.g. raw materials, packaging.

What is the formula for total costs?

Total costs = fixed costs + total variable costs.

What are the steps to calculate total costs?
e.g. fixed costs £200, variable cost £3 per unit, 50 units made

1. Total variable cost = variable cost per unit $\times$ output: $3 \times 50 = £150$
2. Add fixed costs: $200 + 150 = £350$

True or false? Rent on a shop is a variable cost.

False. Rent is a fixed cost because it stays the same however much the business produces or sells.