Thursday, 13 September 2018

Year 12 L2 Lesson 2 Fixed costs, variable costs and making a profit

Dear Year 12


  • Can we start by marking the homework?


  • Recap of last lesson here.  How many will you get out of 10?

  • Remind me how do we calculate revenue?

  • Notes
    There is a saying 

     "if the numbers don't add up on the spread sheet they wont add up in real life"
    Costs
    Running costs also know as operating costs or overheads
    Start up costs
    Fixed costs - also known as indirect costs
    A fixed cost, however, does not change in the short term so the rent of a factory at £500 per week will not change if the business makes 100 pizzas or 1000 pizzas

    Variable costs - also known as direct costs
    Remember variable costs are the cost of making one item so if you make 100 items this cost is multiplied by 100.

    Total costs = Variable costs + Fixed costs
    Calculating total costs then becomes obvious when you understand the different costs a business has to deal with.


    Key terms test 1
Understanding and calculating profit


Profit means that revenue is more than expenditure


Loss mean that the expenditure is more than the revenue


Profit = Total revenue  - total costs (expenditure)


If the figure is positive, then the business in making a profit
If the figure is negative then the business is making a loss


Work out the profit or loss for the following businesses:


1. Business A sells 20 items at £5 each and has expenditure amounting to £40


2. Business B sells 200 items at £10 each and has expenditure amounting to £800


3. Business C sells 15 items at £50 each and has expenditure amounting to £1000


4. Business D sells 25 items at £15 each and has expenditure amounting to £250


5. Business E sells 115 items at £50 each and has expenditure amounting to £6000





Activity Which is best?


On this course you need to know that there are TW0 types of profit.
Gross Profit & Net Profit but I think that's enough for today!



Well done for keeping up


Mr T





Profit = Revenue - expenditure
 



 

 









and this here a great revision resource also.




Mr T

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