Download Profit worksheet starter File

Profit
1.
Fill in the missing words:
Profit is the value of sales (revenue) minus the costs incurred in generating those sales (total costs). Revenue is the
value of _____________________ made within a time period (such as a financial year). It is calculated by the
formula: REVENUE
=
Sales volume
x
__________________ .
Total costs comprise the fixed overheads plus
the total variable costs. These must be deducted from ___________________ to give _________________.
2. Calculations 1.
2.1 If a firm sells 200 Widgets at £3.20 and 40 Squidgets at £4, what is its total revenue?
2.2 In the above example, each Widget costs £1.20 to make, while each Squidget costs £1.50. What are the total
variable costs?
2.3 If fixed costs are £300, what profit is the business making?
3. Explain exactly how the following changes might affect profit
3.1 A firm in a highly competitive industry increases its prices by 8%. ___________________________________
______________________________________________________________________________________
______________________________________________________________________________________
3.2 Demand for a firm’s products falls by 25% due to changing fashions. _________________________________
______________________________________________________________________________________
______________________________________________________________________________________
3.3 New production methods increase a firm’s factory reject rate. _____________________________________
______________________________________________________________________________________
______________________________________________________________________________________
4. Calculations 2.
4.1 BYQ Co has sales of 4,000 units a month, a price of £4, fixed costs of £9,000 and variable costs of £1. Calculate its
profit.
______________________________________________________________________________________
4.2 At full capacity output of 24,000 units, a firm’s costs are as follows:
managers’ salaries
£48,000
materials
£12,000
rent & rates
£24,000
piece-rate labour £36,000
a) What are the firm’s total costs at 20,000 units? _________________________________________________
b) What profit will be made at 20,000 units if the selling price is £6? ____________________________________