222 Sales, Revenue and Costs AS Edexcel New Specification 2015 Business By Mrs Hilton for

Lesson Objectives To be able to calculate sales volume To be able to calculate sales revenue Calculation of fixed costs Calculation of variable costs To be able to answer sample exam questions based on the topic area

From the specification a) Calculation of sales volume and sales revenue b) Calculation of fixed and variable costs

Guidance from Edexcel

Starter Watch a video and take a test on revenue cost and profit here – you probably know plenty to start with!

Calculation of sales volume This is the quantity of products sold in a specified period (e.g. a year) Formula:

Sales volume Calculate the sales volume for these 3 businesses: Express answers in number of units sold SR SP SV A £100,000 40p B £60,000 £1.20 C £80,000 £4.60 A 250,000 units B 50,000 units C 17,391 units

Sales revenue Money into the business through sales (cash tin). May also be known as turnover, or just sales.

Calculation of sales revenue The formula for calculating sales revenue is: This is also the reverse of the sale volume, where quantity is the same as sales volume

Sales revenue Calculate the sales revenue for these three business Express answers in £ SP SV SR A £5.50 40,000 B 30p 125,000 C £2.00 65,000 A £220,000 B £37,500 C £130,000

Fixed costs These are costs that do NOT vary with the level of output or sales. E.g. stall rental.

Calculation of fixed costs These costs are the same at all levels of production; rent, rates, insurance, salaries, lease of machinery. 0- full capacity the fixed cost line will be the same In the long term costs may rise due to inflation but in the short term these have to paid even if there is no output £ cost Output 500 In this example the fixed costs at 0 production is £40,000 and the fixed costs when making 500 items is £40,000 fc 40,000

Variable costs These are costs that do vary with the level of output or sales. E.g. cost of stock sold

Calculation of variable costs Variable costs change with the amount of goods being produced For example; raw materials, fuel, packaging, wages (not salaries) of staff who only work when it is busy At zero output costs are zero £ cost Output 500 vc In this example the variable cost line is red, at 0 output costs are zero, but as output rises to 500 the costs rise too fc

Sample questions

Sample question 1 2 marks – no context required

Answer question 1

Sample question 2 2 marks no context required

Answer question 2

Sample question 3

Answer question 3

Sample question 4 4 mark question Case on next slide

Sample question 4 2 marks State the fixed costs

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Answer question 4

Revision Video

Glossary Sales revenue; Also known as turnover, this is the amount the business is sold and is calculated by price x quantity, or p x q Sales volume; the quantity sold Fixed cost; A cost to the business which does not vary with output Variable cost; A cost to the business which does vary with output