Production, costs, revenue and profit

What is total revenue?

The total income received as a result of selling finished goods or services.

What is a fixed cost?

Any cost that does not change as output changes e.g. rent

What is a variable cost?

Any cost that does change as output changes.

What is average cost?

The total cost divided by the number of units produced

What is the total cost?

Fixed costs + variable costs

Give 3 business objectives

• Profit maximisation

• Sales growth.

• Increase in market share.

What is the difference between production and productivity?

• Production is the process of manufacturing a product.

• Productivity is a measure of the level of efficiency of the production process.

How do you calculate labour productivity?

output per person/ time period

What are economies of scale?

Any financial benefit that comes from increasing output or production and leads to a fall in average unit costs.

What are diseconomies of scale?

Any financial disadvantages that come from increasing output or production. Leads to rise in average unit costs.

Give me 3 benefits of increased productivity

• Should increase output per time period, leading to higher possible sales.

• Can lower costs of production leading to higher possible profit levels.

• Could improve quality of products which may improve competitiveness.

3 factors that influence productivity

• Ability to use division of labour.

• Increased use of technology

• Improved morale within workforce.