costs

Revenues, Costs and Profit – Basics

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Key terms

revenue: value of total sales made by a business within a period
costs: the expenses incurred by a firm in producing and selling its products, e.g. wages and raw material
profit: difference between a firm’s sales revenues and its total costs
sales revenues = volume of goods sold multiplied by average selling price

There are two key elements of sales revenues

and the prices at which they are sold.
Increasing the revenues requires either selling more or selling at a higher price.
accounting costs: costs in terms of the resources involved
one-off profit: profit from a source other than trading which cannot be expected to occur regularly
opportunity costs: costs of a decision is measured in terms of the foregone alternative
profit margin: profit expressed as a proportion of revenue
profit utilisation: how a firm uses its profit after taxation
Source: Marcous, Ian: Business Studies, Hodder & Stoughton, 2003.

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