Estimating revenues, costs and profits

Estimating revenues:

Estimating revenue is when you predict the amount of revenue you will receive from various sources. For example: You could predict that you will receive £250 revenue in a month from ice cream sales, and £200 from soft drinks.

Estimating costs:

Estimating costs is similar to estimating revenue. But in this case you predict the costs you will have to pay. For example: you could predict that you will pay £50 on petrol and £200 on advertisements.

Sales volume:

Sales volume is the quantity of items you have sold. For example: you could have bought 20 ice creams and sold 15. The 15 you sold would be the sales volume.

Fixed costs:

Fixed costs are the costs that require the same amount of money each time you pay. For example: A fixed cost could be the cost for car insurance as it would cost the same amount each month. Therefore it is 'fixed'.

Total costs:

The total cost is the sum of all of your costs (variable and fixed). For example: If in one month your costs were £30 + £100 + £250 + £70, your total costs would be £450.

Variable costs:

Variable costs are costs that are likely to change every month. For example: Your water bill would be a variable cost as one month it could cost £100, and then the next month it could change to £70. In other words, the cost varies depending on certain variables.

Profit:

Profit is what you get if your revenue is higher than your costs. For example: If you had £100 revenue and £40 of costs, this would be a profit of £60 (revenue - costs = profit). Profit means that your business was successful during that month (or year) as you ended up with more money than you had before.

Loss:

Loss is the opposite of profit. Loss means that you had more costs than revenue. For example: If you had £50 revenue and £60 of costs, you have lost £10. Making a loss means that your business has not been successful in that month (or year) as you have ended up with less money than you had before.

Questions:

1. If a company has sold 4 bikes at £200 each, 20 bike helmets at £20 each and 10 bike pumps at £10 each, how much total revenue has the company received?

A) £1200        B) £1300        C) £1500        D) £900

2. This same company then spent £1400 on spare bike parts and paint. Has the company made a profit or loss?

A) Profit        B) Loss