2.  To understand the different types of costs that exist and how you use them in calculations.

3.  The costs that stay the same no matter what your output is.  Examples include things such as rent, insurance, advertising and interest payments.  You have to pay these even if your factory is closed and making nothing.  Sometimes called overheads.

4.  These go up and down depending on how many of your product you are making.  There is a direct link to output.  Examples include raw materials, packaging, fuel and labour.  If a business makes nothing, the variable costs will be zero.

5.  This is your fixed costs and your variable costs added together.  TOTAL COSTS = FIXED COSTS+VARIABLE COSTS

6. Cost (£) Trainers wages400 per course Other variable costs100 per course Premises rent10,000 pa Lorry hire costs20,000 pa Other fixed costs10,000 pa The business trained 200 staff. Fixed costs = 40,000 (10,000+20,000+10,000) Variable costs = 100,000 (500 x 200) Total costs = FC + VC = 40,000 + 100,000 = £140,000

7.  BatCraft make cricket bats. They employ 6 workers to make the bats.  BatCraft produce 4800 bats, what is the total cost of production? $ Rent50,000 pa Business rates5,000 pa Other fixed costs25,000 pa Wood30 per bat Other raw materials10 per bat Labour50 per bat Other variable costs10 per bat

8.  Calculated by taking the total cost and dividing by how many products are made.  Average cost = Total Cost Quantity produced Eg, £140,000 = £700 per course 200

9.  This is all of the money coming in from sales.  Total revenue = Price x Quantity  Eg, 900 courses at a cost of £200 each 900 x 200 = £180,000

10.  This is the money that is left after paying all of the costs.  Profit = Total revenue – Total costs  Eg, £180,000 - 140,000 = £40,000

11.  Glenn bought a family cruiser in 2007 with a loan to offer daily fishing trips.  He charges $500 per day for the trip that takes up to 6 people.

12. CostsJanuary $February $ Tackle hire560440 Insurance50 Interest payment3,000 Picnic hampers2,8002,200 Fuel1,4001,100 Advertising100 Other fixed costs300 Number of trips2822

13.  Calculate Glenn’s total costs in January and February  Calculate the revenue make in January and February  Calculate the profit in January and February  Calculate the average cost of a trip in January and February

14. What does 'total cost' mean?  The total income earned by a firm  The total expenses of a firm  The total amount of profit earned by a firm

15. What does the amount of revenue a business earns each month depend on?  Selling price  Quantity sold  Both selling price and quantity sold

16. What is revenue sometimes called?  Turnover  Overheads  Price

17. An increase in output does NOT mean an increase in:  variable costs.  overheads.  direct costs.

18. A firm sells 10 units at £5 each. Its total costs are £30. How much profit is made?  A £50 profit is made  A £20 profit is made  A £20 loss is made

19. How do you calculate profit? Subtracting total costs from total revenue Subtracting total revenue from total costs Multiplying the quantity sold by price

20. How do you calculate total revenue?  Quantity sold x average price  Quantity sold x average cost  Quantity sold x average profit

21. When is a business making a loss?  When revenues are higher than costs  When revenues equal costs  When revenues are less than costs

22. When is a business making a profit? When revenues are higher than costs When revenues equal costs When revenues are less than costs

23. If a company reduces a product's price, what does this mean for their revenue?  There will be an increase in revenue  There could be an increase or decrease in revenue  There will be an decrease in revenue