1.3.2 Business revenues, costs and profits

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Which term describes the money a business earns from selling its goods or services over a set period of time?: Revenue
What is meant by 'fixed costs'?: Costs that do not change when the level of output changes
What is the name for the point at which a business's total revenue is exactly equal to its total costs?: Break-even output
What is meant by 'margin of safety'?: The amount by which a business's current output is greater than its break-even output
What is the name for the payment made for the use of borrowed money, charged as a percentage of the amount borrowed?: Interest
What is meant by 'loss'?: When a business's total costs are higher than its total revenue
A business sells 250 units at a price of £35 each. What is its total revenue?: £8,750
Which of the following is a fixed cost for a bakery?: The rent paid each month on the shop
A business produces no output for a month. What happens to its variable costs?: They fall to zero because nothing is produced
A business has fixed costs of £18,000 for the year and makes 35 products that each cost £25 to make. What are its total costs?: £18,875
A business has total revenue of £12,000 and total costs of £9,500. What is its profit?: £2,500
A business borrows £20,000 at an interest rate of 5% per year. How much interest does it pay in the first year?: £1,000
A business has fixed costs of £3,000. Each unit sells for £10 and has variable costs of £5. It sells 750 units. What is its margin of safety?: 150 units
What is meant by 'variable costs'?: Costs that change as the level of output changes
What is meant by 'total costs'?: The fixed costs added to the variable costs
A business has fixed costs of £3,000 a month. Each unit is sold for £20 and has variable costs of £5. What is its break-even output?: 200 units
A business's rent rises, but its selling price and variable costs stay the same. What happens to its break-even output?: It rises, because more units are needed to cover fixed costs
On a break-even chart, how can you tell that a business is making a profit at a particular level of output?: The total revenue line is above the total costs line
A business increases its output, but its fixed costs and the variable cost per unit stay the same. What happens to its total costs?: They rise, because variable costs rise with output

1.3.2 Business revenues, costs and profits

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