AS Business

1. Do Now
What do you remember from
‘Employing People’ ….
Test what you’ve learned!

2. Calculating costs, revenue
and profits

3. Learning Objectives
By the end of this lesson you should be able to:
1. Separate business costs into fixed and variable costs
2. Explain the meaning and importance of profit
3. Make a clear distinction between the revenue earned by
a business and its profit or loss
4. Calculate the total cost and total revenue at different
levels of output

4. Box Clever
Box clever is a small company that specialises in creating
cardboard packaging. Calculate the following total costs:
Cost of materials
One piece of card with box template drawn = £1
Scissors = £5
Glue = £2
How much to make 1 box?
How much to make 2, 5 and 10 boxes?
LO1) Separate business costs into fixed and variable costs

5. Box Clever
Did you calculate the total costs correctly?
TOTAL COSTS SALES REVENUE PROFIT/ LOSS
1 Box: £7 + £1 = £8
2 Box: £7 + £2 = £9
5 Box: £7 + £5 = £12
10 Box: £7 + £10 = £17
What did you notice about the cost of the scissors and
glue?
What did you notice about the cost of the boxes?
LO1) Separate business costs into fixed and variable costs

6. Box Clever
Now that we know how much it will cost to create the
boxes, we now need to know how much sales revenue will
be earned. Calculate the sales revenue:
Box retail
One box will retail at = £2
How much to make 1 box?
How much to make 2, 5 and 10 boxes?
LO1) Separate business costs into fixed and variable costs

7. Box Clever
Did you calculate the sales revenue correctly?
TOTAL COSTS SALES REVENUE PROFIT/ LOSS
1 Box: £7 + £1 = £8 1 Box: £2 = £2
2 Box: £7 + £2 = £9 2 Box: £4 = £4
5 Box: £7 + £5 = £12 5 Box: £10 = £10
10 Box: £7 + £10 = £17 10 Box: £20 = £20
What do you notice about the revenue?
LO1) Separate business costs into fixed and variable costs

8. Box Clever
Now we know the total costs and sales revenue, how
much was the profit/ loss?
TOTAL COSTS SALES REVENUE PROFIT/ LOSS
1 Box: £7 + £1 = £8 1 Box: £2 = £2 1 Box: - £6
2 Box: £7 + £2 = £9 2 Box: £4 = £4 2 Box: - £5
5 Box: £7 + £5 = £12 5 Box: £10 = £10 5 Box: - £2
10 Box: £7 + £10 = £17 10 Box: £20 = £20 10 Box: £3
What do you notice about the profit/ loss?
LO1) Separate business costs into fixed and variable costs

9. Can you match the correct
definitions?
LO1) Separate business costs into fixed and variable costs

10. Check your formula….
LO1) Separate business costs into fixed and variable costs

11. Why is profit so important?
Think Pair Share
Write down your Walk around the Share your ideas
reasons. room until the with the rest of
music stops and the group.
share your
ideas.
Profit is the surplus value after sales after costs have been deducted from
revenue.
Used as a measure of success.
Banks and other lenders are more willing to lend or invest.
Reward for entrepreneurs after taking risks.
Profit provides further finance that can be reinvested.
LO2 - Explain the meaning and importance of profit

12. Rashid – Sat Nav Business (1)
Read the case study based on Rashid’s Sat Nav
business….
1. Identify any fixed and variable costs
2. Calculate Rashid’s total monthly fixed and variable costs
(ignoring set-up costs) if he sells 12 units.
3. Complete questions 1-4 (ignore any start up costs)
LO3 - Make a clear distinction between the revenue earned by a business and its profit or loss

13. Forecasting costs and revenue
Discuss and write down…
5 minutes
5 reasons why it is important for a
business to forecast costs and
revenue.
Chose your top 3 reasons
Feedback to the rest of the group.
LO3 - Make a clear distinction between the revenue earned by a business
and its profit or loss

14. Rashid – Sat Nav Business (2)
1. Rashid wants to increase his sales revenue – what should he do? Are
there any drawbacks?
2. Could you suggest any ways that Rashid could try to sell more Sat Navs
without changing the price?
3. Recalculate Rashid’s revenue for month 2:
a) He reduced his price for a fitted Sat Nav to £250 and sold 13 of them.
b) What is Rashid’s profit margin for each Sat Nav when selling at this price.
LO4 - Calculate the total cost and total revenue at different levels of output

15. Key Terms
Costs that do not change with the
level of output or sales.
Fixed Costs

16. Key Terms
Costs that change directly with the
level of output or sales.
Variable Costs

17. Key Terms
Selling price x No of items sold
Total Revenue

18. Key Terms
Total Revenue – Total Cost
Profit

19. Key Terms
Expenditure made by a business as
part of its day-to-day trading.
Costs

20. Key Terms
Fixed Costs + Variable
Total Costs

21. Key Terms
The value of sales made during a
trading period
Sales Revenue

22. Re-cap Learning Objectives
You should now be able to:
1. Separate business costs into fixed and variable costs
2. Explain the meaning and importance of profit
3. Make a clear distinction between the revenue earned by
a business and its profit or loss
4. Calculate the total cost and total revenue at different
levels of output