financial planning: sales,revenue and costs

average cost/ unit cost

cost of producing one unit

total cost/ total output

fixed cost

a cost that does not change as a results of a change in output in the short term

e.g rent, insurance heating bills etc

long run/ long term

the time period where all factors of production are variable

profit(loss)

the difference between total costs and total revenue

sales revenue

the value of output sold in a particular time period.

sales revenue= cost x quantity of product

sales volume

the quanitity of output sold in a particular time period

semi-variable costs

consist of both fixed and variable elements.

repairs and maintenance, telephone and electricity bills, vehicle expenses, Internet fees, payroll and employee compensation.

short run

the time period where at least one factor is fixed

total cost

the entire cost of producing given a certain level of output

total cost =fixed cost + variable cost

total revenue

the whole amount of money recieved from selling output

variable costs

costs that rise directly porpprtionally to output rises

business costs

• reiable and accurate cost information is required to make informed business decisions

profit equations

difference betwen revenue and costs

profit = total revenue - total costs

ways of improving sales volume

• advertising

• promotion

• improved targeting

• extend product range

• extend distribution networks

• develop relationships with customers

improving sales volume

• changing the price

• raisning the price

• lowering the price

• adding complementary services or goods

how does raising the prices affect sales revenue

raising the price can increase revenue IF the demand is price inelastic

how does raising the prices affect sales revenue

can only increase the sales revenue if the demand is elastic