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Financial Planning

Sales, revenue and costs

  • 7 things to know
  • Paper 2 and Paper 3

Overview

Sales volume and sales revenue, fixed, variable and total costs and how each behaves as output changes, rearranging the formulae, and calculating percentage changes and percentage point differences.

What you need to know

Answer each one before you reveal it.

Your recallNot started
Numbers

Define fixed costs and state how sales revenue is calculated.

Key term

Define variable costs.

Numbers

How are total variable costs calculated?

Numbers

What happens to variable cost per unit as output increases?

Process

What happens to total variable costs as output increases?

Numbers

State the sales-revenue formula.

Numbers

State the total-variable-cost formula.

Questions from this subtopic

Each one with the model answer underneath.

  1. 1

    Define sales volume.

    Model answer

    Sales volume is the total number of units sold by a business over a given period.

  2. 2

    What is sales revenue?

    Model answer

    Sales revenue is the total income received from selling goods or services, calculated by multiplying selling price per unit by the quantity sold.

  3. 3

    State the formula for calculating sales revenue.

    Model answer

    Sales Revenue = Selling Price per Unit × Sales Volume.

  4. 4

    What two variables are multiplied together to determine sales revenue?

    Model answer

    Selling price per unit and sales volume (quantity sold).

  5. 5

    Calculate the sales revenue when selling price per unit = £208, sales volume = 2250 units.

    Model answer

    Sales revenue = 208 × 2250 = £468,000.

  6. 6

    Define fixed costs.

    Model answer

    Fixed costs are expenses that do not change with the level of output or sales volume in the short term.

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