1. Calculating Costs, Revenues and Profits
AS Business Studies

2. Aims and Objectives Aim:
To understand the difference between costs, revenues and profits
Objectives:
Define costs, revenues and profits
Explain the importance of profits
Describe fixed and variable costs
Calculate and analyse costs and profits

3. In groups decide on definitions of:
Starter
In groups decide on definitions of:
Profit
Costs
Revenues

4. Profit
What is left after deducting costs from revenues. Profit = Total Revenue – Total Costs

5. The expenditures made by a business from its operations.
Costs
The expenditures made by a business from its operations.

6. Revenues
The value of sales made over a period of time. Total Revenue = selling price x number of items sold

7. Importance of Profit
In groups brainstorm reasons as to why profit is important to entrepreneurs and businesses.

8. Importance of Profit Used as a measure of success.
As a surplus profit provides a source of finance for future expansion.
It is the return or reward for entrepreneurs. If no profit is made, this will discourage future investment, may lead to closure and failure.
Banks or lenders, wish to see a business predict or/and make profits before lending
Used as a measure of success.
Importance of Profit

9. In groups decide on definitions of:
Costs
In groups decide on definitions of:
Fixed Costs
Variable Costs
Total Costs

10. Types of Costs Fixed Costs Variable Costs Total Costs
Costs that do not change with the level of output or sales.
Eg. Rent
Fixed Costs
Costs that change directly with the level of output or sales
Eg. Raw Materials
Variable Costs
Fixed Costs + Variable Costs
Total Costs
Types of Costs

11. £ Fixed Costs
£ Variable Costs
Sales/Output
Sales/Output

12. Rashid Case Study
From the case study, make two lists, one of fixed costs and one of variable. Total each column for the month assuming that Rashid sells and fits 12 units. (Per Year)

13. Now calculate Rashids’ profit in this month, still assuming he sells 12 units at £275 each.

14. Profit = Total Revenue – Total Costs £3,300 - £1,790 = £1,510 Profit
Rashid Case Study
Profit = Total Revenue – Total Costs £3,300 - £1,790 = £1,510 Profit

15. Definition Quiz Total costs Fixed costs Variable costs Profit Costs
Revenues
Patents
Trademark
Copyright

16. June 2009 qu 1e