CTA Business Studies 5.

3 – Revenue, costs, profit, loss

Revenue, Costs, Profit, Loss

Task 1 - Revenue, Fixed and Variable Costs

Revenue

Definitions:

Revenue is the amount of money coming in to a business from sales alone

Calculate the revenue for each of the following business scenarios. Show your working.

1. Dave owns a market stall selling confectionary. He buys 300 bars of Dairy Milk from the local wholesaler

for £100. He sells each bar of chocolate for £1.50 and sells out in a single weekend of trading. What is his

revenue for the weekend?

Revenue: 300*1.50 = £450

Profit or loss? Yes/No

2. John sells dog biscuits to crazy cat ladies in his village. He purchases 500kg from a local supplier for £ 2000

and breaks these down into 500g bags. He sells each bag for £3.50 and sells out within a month. What is

John’s revenue?

Revenue: 500kg * 2 = 1000 bags. 1000 bags * 3.50 = £3,500

P ro fit o r lo ss? Yes/No

3. Joan knits tea cosies to keep teapots warm in the cold winter months. Each cosy uses half a ball of multi

coloured wool which she buys from the local knitting shop for £3.50 per ball. She has, remarkably, seen

record sales this year of 1,500 units and has sold each one for £2.99. What is her yearly revenue?

Revenue: 2.99 * 1500 = £4,485

P ro fit o r lo ss? Yes/No

Fixed and Variable Costs

Definitions:
CTA Business Studies 5.3 – Revenue, costs, profit, loss

A fixed cost is: A cost which does not change in line with production

Variable costs are: Costs which are directly proportional to sales

Complete the table below to indicate which type of cost each one is. Add two of your own to the end.

Cost Fixed Variable

Paying staff wages yes

Rent/Mortgage Y es

Gas Y es

Raw materials Y es

Loan repayments Y es

Electricity Y es

Business Rates (tax) yes

Work out the Fixed costs, Variable Costs an d Total Costs for each of the businesses below:

Business A – Perfect Pigeons’ Market Stall

Perfect Pigeons are suppliers of fine bird seed and other ornithological wonders. They rent a temporary “pop up shop” location for two

d ay s at a co st o f £ 50 p er d ay . T h e ad v ertise th eir fo rth co m in g sale o f seed , feed ers an d b ird b o x es in th e lo cal n ew sp ap er fo r

and also on social media for £80.

They sell bags of seed for £2.50, each one costs them 5p for the bag, 5p for the sticker on the front and 25p for the

seed.

They purchase some bird feeders from a local wholesaler for £1.50 per feeder. The sale price of each bird feeder is

set at £ 5
CTA Business Studies 5.3 – Revenue, costs, profit, loss

They decide to make their own bird boxes out of raw materials themselves. These materials cost £ 5 per box and

each bird box is sold for £15.

To further promote the business, they print out and include a business card and leaflet with every sale they make .

The printing of a business card and leaflet costs 3p.

After their two days of trading, they have put together and sold 77 bags of seed, 25 feeders and 18 bird boxes .

Perfect Pigeons – Total Costs

Fixed Costs Variable Costs

Item Quantity Total cost Item Quantity Total cost

Rent 2 £100 Seed 77 £26.95

Advertising 1 £180 Feeders 25 £37.50

£ Boxes 18 £90

£ Card and leaflet 120 £3.60

£ £

Total Fixed Costs £280 Total Variable Costs £158.05

Total costs: £438.05

Business B – Crispy Candles

Crispy Candles spotted a niche market for candles which produce the scents of various flavours of crisps. Their best seller so far is

the “Aroma de Frazzles” which gives off a mellow fake bacon scent.

Crispy candles operated froma website which cost £3000 to set up and design. They take payments through all major credit and debit

cards and these payments are handled by an outside payment processing company. The payment processing company charge

per transaction.

Each candle consists of a wick, wax, glass jar and some scent and costs £1.70 per candle to produce. They then have to package each

can d le safely fo r p o stag e. P ack ag in g co sts 50p p er can d le so ld an d p o stag e is £ 2.

Crispy Candles also has some extra costs. Their Post Office account, which gives themaccess to bulk mail sending has cost them£50.

Since their business began to expand, they have had to find some extra space for both storage, postage and packing

and as such, they rent a small office at a cost of £600 per month. Bills for the office include electricity, water and an internet

connection at a combined total of £175 a month.

This month, Crispy Candles had sales of 6325 units.

Crispy Candles – Total Costs

Fixed Costs Variable Costs

Item Q u an tity Total cost Item Q u an tity Total cost

W eb site 1 £3000 Credit card fees 6325 £1,581.25

Postage and
Post office 1 £50 6325 £15,812.5
packaging

Storage 1 £600 Candles 6325 £10,752.5

Bills 1 £175 £

£ £

Total Fixed Costs £3825 Total Variable Costs £28,146.25

Total costs: £31,971.25