What does cost of sales measure?

Cost of sales measures the direct cost of the goods actually sold in the period, chiefly the materials and the direct labour used in making them.

State the formula for cost of sales using inventory figures.

Cost of sales = opening inventory + purchases − closing inventory.

Opening inventory is £25,000, purchases are £310,000 and closing inventory is £35,000. Calculate the cost of sales.

The cost of sales is £300,000.

WJEC A-Level Business 601-5238-2

Enterprise and Starting a Business

Topic overview Enterprise and the entrepreneur Stakeholders in a business Business plans and sources of support Legal structures of business The public and private sectors Business location Sources of finance for a new business Business revenue, costs and profit

Markets and Market Research

Topic overview Types of market Market size, market share and market trends Market segmentation The degree of competition in a market Perfect competition and monopolistic competition Oligopoly and monopoly Consumer protection Demand and the demand curve Supply and the supply curve Market equilibrium and changes in price and quantity Price and income elasticity of demand Inferior, normal and luxury goods The value of market research Primary market research Secondary market research Qualitative and quantitative data Sampling and avoiding bias

Marketing

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People in Business

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Operations Management

Topic overview Added value Job, batch and flow production Choosing the right method of production Productivity Capacity utilisation New technology in operations Lean production and kaizen Just-in-time and cell production Quality control and quality assurance Total quality management Stock control and stock control diagrams Purchasing and working with suppliers Innovation, research and development Internal economies of scale External economies of scale Diseconomies of scale and the survival of small firms

Business Finance and Accounts

Topic overview Internal sources of finance Loans, overdrafts and trade credit Share capital and venture capital Leasing and debt factoring Choosing an appropriate source of finance Finance for entrepreneurs and SMEs in Wales Revenue, costs and profit Types of cost Contribution and break-even Break-even charts and the margin of safety Budgets and budgeting Cash flow forecasting Improving cash flow The income statement Gross and net profit margins

Business Analysis and Decision-Making

Strategy and Implementation

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Managing Change and Risk

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The External Environment

Topic overview Government and the framework for business The economic environment Social and demographic change Technology and business Business ethics and corporate social responsibility The legal environment Business and the environment

Global Business

Topic overview International trade and protectionism Globalisation and its causes Global growth strategies and multinationals The European Union and the euro

Business Finance and Accounts

The income statement

3 things to know
AS Unit 2

Overview

Three sections of an income statement, formula for gross profit and formula for cost of sales using inventory figures.

What you need to know

Answer each one before you reveal it.

Your recallNot started

Key term

What does an income statement show?

Key term

Name the three sections of an income statement.

Numbers

State the formula for gross profit.

Questions from this subtopic

Each one with the model answer underneath.

1
What does an income statement show?
Model answer
An income statement shows a business's revenue, costs and profit over a period of time, usually a financial year.
2
Name the three sections of an income statement.
Model answer
The trading account, the profit and loss account, and the appropriation account.
3
State the formula for gross profit.
Model answer
Gross profit = revenue − cost of sales.
4
What does cost of sales measure?
Model answer
Cost of sales measures the direct cost of the goods actually sold in the period, chiefly the materials and the direct labour used in making them.
5
State the formula for cost of sales using inventory figures.
Model answer
Cost of sales = opening inventory + purchases − closing inventory.
6
Opening inventory is £25,000, purchases are £310,000 and closing inventory is £35,000. Calculate the cost of sales.
Model answer
The cost of sales is £300,000.

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Enterprise and Starting a Business

Markets and Market Research

Marketing

People in Business

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Gross profit = − cost of sales.

revenueprofitexpenses

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