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Probability Grade 12 Essential Math
Revenue and Expenses Probability Grade 12 Essential Math
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Business Basics What is a business?
A business provides a good or a service in order to make a profit. Good: a product that a business sells Service: a task a business performs for customers
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Profit The purpose of all business is to earn profit.
Profit is earned when a business collects more money in revenue then they spend on expenses. A business suffers a loss when their expenses are more than their revenue.
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Expenses Expenses are anything a business spends money on.
Common expenses include salaries, supplies, advertising, raw materials, etc. Expenses can be either Fixed: the same every month Variable: may change each month
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Revenue Revenue is any money a business collects in return for a good or service. Revenue is usually earned by sales. Like expenses, revenue can be either fixed or variable.
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Example Which of the following are revenue and which are expenses?
Which are variable and which are fixed? Item Cost Business Insurance $200/year Salaries $8000/month Raw Materials $5000/month Vehicle Insurance $2100/year Maintenance Contract $1700/quarter Shed Construction $2000 last month Painting $9500 last month
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Monthly Costs Frequently, revenue and expenses may be listed as “per year” or “per quarter” We convert these to monthly costs for easier comparison Hint: there are 12 months in a year, and 3 months in a quarter.
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Example Convert these costs to monthly: Item Cost Business Insurance
$200/year Salaries $8000/month Raw Materials $5000/quarter Vehicle Insurance $2100/year
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Break-Even Point Businesses will often borrow money to help them get started. They will pay back this money over time. If a business is earning a profit each month, we can determine how long it will take them to “break-even”. To find the break-even point, divide the cost of the loan by the monthly profit.
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Example Keith runs a DJ company. He recently purchased a new sound system for $ He does about 5 DJ events each month, and charges $400 per event. How many months will it be before Keith breaks even?
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