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CREATIVITY
Presented by PERSON for COMPANY
Revenue, Costs & Break-even
Sales Revenue- money a business recieves for selling the good or service
Sales revenue= Quantity sold x selling price
Revenue, Costs & Break-even
Methods to increase revenue...
Raising Price
May increase sales revenue provided quantity sold does not decrease.
Higher price may lead to fall in demand therefore reduced sales revenue
Raising Price
Apple
reducing price
Should lead to increase in consumption/ demand to offset reduced price
reducing price
elasticity
Amount of change in demand (caused by a change in price) refered to as elasticity
Elasticity is the responsivness of demand to a change in price
elasticity
Increasing amount sold
Increasing amount sold
Sales revenue can be increased by keeping price constant but increasing amount sold
Methods/ factors affecting sales
- increase advertising
- increase sales outlets
- increase product range
- number of competitors
- % of income spent on product
- necessity?
business costs
There are a range of different costs involved in running a business.
Businesses must be aware of all costs in order to ensure profit. (Profit= Sales Revenue- Costs)
business costs
Fixed costs
- These do not change in relation to how much output the business produces
- i.e. fixed costs stay the same if they produce 10 or 20,000 units
- e.g. business rates
Fixed costs
Variable Costs
- These costs INCREAESE as output increases.
- If a business produces 1,000 rather than 10 units variable costs will increase
- i.e. costs of inputs for example ingredients to make pizza at a restaurant
Total costs
Worked out by adding FIXED and VARIABLE costs together
Average costs
-Showing the cost per unit to produce
- Average costs decreases as you produce more (up to a point)
- AVERAGE COST= TOTAL COST/ NO. OF UNITS SOLD
- How much does it cost to produce each unit.
Average costs
Economies of scale
As output increases, average cost per unit can fall.
Economies of scale
Types of economies of scale....
Technical Economies
Use of better methods of production and increased use of technology
Managerial Economies
Managers skills being used to oversee more employees. 1 manager to 20 employees rather than 3
Easier to employ specialist managers
Financial Economies
Larger businesses are more able to acess finance to use for growth and development
Financial Economies
Risk- bearing economies
Wider variety of goods/ services are offered by bigger companies therefore less succeptible to loss in demand for one good
Risk- bearing economies
Purchasing Economies
Discounts given if raw materials and inputs are bought in bulk therefore reducing costs.
Purchasing Economies
Marketing Economies
Advertising is a fixed cost therefore as the business grows, the average cost of advertising decreases.
Marketing Economies
diseconomies of scale
Firms can become to big to be managed efficiently and the inefficiencies cost the company therefore losing economies of scale and increasing average costs.