Basic Terms
What does the word “cost” mean
Money a business spends
What are fixed costs?
Costs that usually stay the same, such as rent
What is sales revenue?
The total money earned from selling products.
What is the formula for profit?
Profit = Revenue − Total costs.
A shop spends money to buy products for resale. Is this a cost or revenue?
A cost.
What does “revenue” mean?
Money a business earns from sales.
What are variable costs?
Costs that change with production or sales.
How do we calculate sales revenue?
Units sold × price per unit.
What is gross profit?
Sales revenue minus the cost of goods sold.
A company receives money from selling services. Is this cost or revenue?
Revenue.
What is profit?
Revenue minus total costs.
Is monthly office rent a fixed cost or a variable cost?
A fixed cost.
A shop sells 10 T-shirts for $15 each. What is its sales revenue?
10 × $15 = $150.
What is net profit?
Money left after all expenses are paid.
A shop earns $900 and has costs of $600. Does it make a profit or a loss, and how much?
A profit of $300
What is the difference between cost and revenue?
Cost is money spent; revenue is money earned.
A bakery buys more flour because it makes more bread. What type of cost is this?
A variable cost.
A café sells 40 coffees for $3 each. What is its revenue?
40 × $3 = $120.
Revenue is $2,000 and total costs are $1,400. What is the profit?
$600.
A business has revenue of $1,000 and total costs of $1,000. What is its situation?
It has reached the break-even point.
A business earns $1,000 and spends $700. What is its profit?
$300.
A business has $500 in fixed costs and $300 in variable costs. What are its total costs?
$800.
A business sells 25 products for $12 each. What is its sales revenue?
25 × $12 = $300.
What is the break-even point?
The point where revenue equals total costs.
A company earns $5,000. Its goods cost $2,000 to produce, and other expenses are $1,500. What is its net profit?
$5,000 − $2,000 − $1,500 = $1,500.