1.3.2 Business revenues, costs and profits
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The concept and calculation of:
● revenue ● fixed and variable costs ● total costs ● profit and loss ● interest |
Interpretation of break even diagrams:
● the impact of changes in revenue and costs ● break even level of output ● margin of safety ● profit and loss ● margin of safety. |
Starter
Why is it important to understand your costs, and where they come from?
How will costs influence the marketing mix?
How do you think all you can eat restaurants calculate profit?
How will costs influence the marketing mix?
How do you think all you can eat restaurants calculate profit?
How All You Can Eat Restaurants Make Money
Different types of costs
What do you think the difference is between a fixed cost and a variable cost?
Identify what the following costs may be and if you think they are fixed or variable:
Identify what the following costs may be and if you think they are fixed or variable:
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Rent
Raw materials Wages/salary Insurance |
Piece rate pay
Stock Advertising Depreciation (straight line method) |
Business (council) rates
Interest payment on borrowings Energy used in production Delivery costs |
Profit & Loss
Race to a million - who'd earn a million first Apple, BP, Walmart, Pepsi?
How is it possible for sales to increase but profits to fall?
How is it possible for sales to increase but profits to fall?
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Revenue = price × quantity
TC (total cost) = TFC (total fixed costs) + TVC (total variable costs) Profit = Revenue - TC |
How might the following costs change with output?
> Raw materials > Wages >Packaging > Rent > Business rates |
Calculating InterestWhat is interest repayments?
What type of cost are they and why? Fixed or variable? Why are they important for an individual to understand? Wonga Why is it important for the Government to understand? UK Govt interest Why is understanding the interest repayable on loans important for a business? A01 - Reason A03 - B L T What is the key term to consider when looking at repaying interest for an entrepreneur?
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Bankruptcy in the UK
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Formula:
Students will be expected to know how to calculate the total amount of interest as the percentage of total repayment for a mortgage or loan.
Interest (on loans) in % = [(total repayment - borrowed amount) / borrowed amount] x 100
Students will be expected to know how to calculate the total amount of interest as the percentage of total repayment for a mortgage or loan.
Interest (on loans) in % = [(total repayment - borrowed amount) / borrowed amount] x 100
Break-even
What does the word break-even mean to you?
On a white board how would you plot the following costs and revenue? TR, FC, TVC, TC
On a white board how would you plot the following costs and revenue? TR, FC, TVC, TC
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Costs / Revenue
Quantity
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Breakeven Analysis - Charts
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Why would a business want to conduct break-even analysis?
Tutor2u break-even simulator
What are the advantages of having a low break-even point?
BBC revision
Tutor2u quiz
Tutor2u break-even simulator
What are the advantages of having a low break-even point?
BBC revision
Tutor2u quiz