1. Making a profit or surplus
AO2: Investigate the key elements of financial planning that managers and entrepreneurs must understand
What was your sales revenue if you had sold all your doughnuts?
After paying the cost of buying the doughnuts how much profit would you have been left with?
Making a profit or surplus

2. Making a profit or surplus
In this topic you will learn about
profit/surplus calculations:
profit/loss = total revenue – total cost
surplus/deficit = income - expenditure

3. Profit/loss = total revenue – total cost
Profit is the surplus of revenue over cost
TR > TC = profit
TR < TC = loss
TR = TC = break-even i.e. not making a profit or a loss
Profit/loss = total revenue – total cost
Surplus/deficit = income - expenditure

4. Profit Profit is revenue minus total costs
Revenue is the money coming in from the sale of goods and services
Total costs is the money going out to provide for and generate those sales
The relationship between costs and revenue will determine if the business makes a profit or a loss
Example 2
Example 1 TC
£1300
There is a shortage
(a loss) of £100
Revenue
£1000
There is a surplus
(a profit) of £200
Revenue
£1200 TC
£800
Profit
£200
Loss
£100

5. Calculate revenue, cost and profit
The information below applies to a business:
Selling price = £250
Quantity sold = units
Fixed costs = £70 000
Variable costs per unit = £85
Sales revenue = price x quantity
£250 x units = £
Total costs = fixed costs + total variable costs
£ (£85 x units) = £
Profit = total revenue – total costs
£ £ = £

6. Calculate revenue, cost and profit
The information below applies to a business:
Selling price = £15.00
Quantity sold = units
Fixed costs = £40 500
Average costs per unit = £6.00
What is the total revenue?
What are fixed costs?
What are the total variable costs?
What are total costs?
What is the profit or loss?

7. Making a profit or surplus
In this topic you have learnt about
profit/surplus calculations:
profit/loss = total revenue – total cost
surplus/deficit = income - expenditure