2.2.2 Sales, revenues and costs

Define sales volume

Number of units sold by a business

Define sales revenue

The value of the units sold by a business

Define fixed costs

Costs that do not change as the level of output changes, e.g. building rent, management salaries, insurance, bank loan repayments etc

Define variable costs

Costs that vary directly with the output, e.g. raw materials, wages of workers directly involved in the production.

What is Variable Cost per Unit?

It’s the cost to produce one item — just one.

E.g. So if you're making trainers, and it costs:

• £5 for materials

• £2 for packaging
  → then your variable cost per unit is £7

Define contribution

A product’s selling price minus the variable costs directly involved in producing that unit