1. Costs and Revenue
Topic

2. Money in Business
Businesses need money to exist.

3. Revenue
Businesses will receive money by selling their goods or services
As such we can say that there are two ways a business can get money
Revenue can also be called
Sales Revenue
Total Revenue

4. Different sources of revenue
A business may have different sources of revenue.
For a example a farm;

5. Different sources of revenue
The total amount of money received is calculated using the following formula;
For example, if a firm sells 1 sweet for 20p its total revenue will be (1X 20p) 20p
If the firm sold 5 sweets for 20p each it would received in total (5 X 20p) £1.00
Unit sold is sometimes called Quantity or Sales Volume.
Total Revenue = Selling Price X Number of
(TR) Per unit units sold

6. Forecasting Revenue
A new business will not know how much revenue it will receive
However, they will need to know how much profit they think they will make
To calculate this a business must forecast it’s sales revenue by;
Estimating how many units it will sell based on their market research
Deciding what prices they will charge for each unit sold.

7. Costs
A new business will have 2 types of costs;
Once established a business will only have to pay the running costs.

8. Running Costs

9. Total Costs (TC)
This is the total amount of money a firm spends on making goods or services
It is calculated using the following formula
Where;
Total Fixed Costs= all fixed costs added together
Total variable costs = Variable cost per unit multiplied by the number of units.
Total Cost = Total Fixed X Total variable
(TC) Costs (FC) costs (VC)

10. An example of Total Costs
A firm makes 10,000 cans of drink
It has the following fixed costs
£1,000 Rent
£5,000 Electricity
They also know that it costs 5p to make every can of drink that it produces
Calculate Total Costs….

11. An example of Total Costs
A firm makes 10,000 cans of drink
It has the following fixed costs
£1,000 Rent
£5,000 Electricity
They also know that it costs 5p to make every can of drink that it produces
Calculate Total Costs….
FC (Rent + Electricity)= _______
VC (NUMBER OF CANS x 5p)= ______
TC = FC + VC= ______

12. An example of Total Costs
A firm makes 10,000 cans of drink
It has the following fixed costs
£1,000 Rent
£5,000 Electricity
They also know that it costs 5p to make every can of drink that it produces
Calculate Total Costs….
FC (£1, 000+ £5,000)= £6,000
VC (10,000 x 5p)= £500
TC = £6, = £6,500

13. Calculating profit and loss
Businesses receive money from selling goods and services
They also have to pay costs in order to make the goods or provide the services
Profit can be calculated using the following formula;
Profit = Sales Revenue – Total Costs

14. Revenue > Costs= Profit
Defining profit and loss
If their sales revenue is greater than their costs then they have made a PROFIT
If their sales revenue is less than their costs, then they have made a LOSS
Revenue > Costs= Profit
Revenue < Costs= Profit

15. Gorgeous Gateaux – case study
Tasks
Gorgeous Gateaux – case study
Warwick case study- start up and running costs
Joyce Curry photography case study

16. Tasks

17. Tasks