Reading Strategies ‘Unlocking the Text’

Revenue is all the money that comes into a business. Interest: Many businesses keep their money in a bank account that pays interest. Sales: Sales are the biggest source of revenue for all commercial businesses. Most businesses sell a product or a service which customers then pay for. Leasing: This is when a business leases out their property or equipment to other organizations. If a business sells more than one product or service and charges a number of different prices, it can estimate its total revenue by calculating the average selling price Formula: Total revenue = selling price x number sold Key words Break-even – Revenue Revenue Revenue Interest Interest Sales Sales Leasing Leasing Average Selling Price Average Selling Price Formula Formula

Start-up costs are one-off costs paid before a new product or service is introduced. Operating costs are the costs involved once the new product or service has been launched, in order to continue its production. These are payable for as long as the product or service is available Fixed, or indirect costs are incurred no matter how many sales a business receives. Unlike fixed costs, variable, or direct costs are directly affected by the level of business activity. Formula: variable cost of each product x number produced Formula: Total costs = fixed costs + variable costs Key words Break-even – Costs Start-Up Costs Start-Up Costs Operating / Running Costs Operating / Running Costs Fixed Costs Fixed Costs Variable Costs Variable Costs Formula Total Costs Formula Total Costs Formula Total Variable Costs Formula Total Variable Costs

A break-even chart allows you to plot the break-even point on a graph, in order to work out approximately how many units you need to sell to cover your costs. You can also work out the break-even point using a formula. This gives a more exact answer than a break-even chart, as it calculates the break- even point with complete accuracy. Break-even point = fixed costs (selling price - variable cost per unit) The margin of safety is the number of sales above the break-even point. actual sales - sales needed to break even The break-even point is the level of output where an organization will just cover its costs. It is the point when a business is making neither a profit nor a loss because its overall income is equal to its expenditure. Profit = 0. Key words Break-even – Analysis Chart Chart Formula Formula Margin of Safety Margin of Safety Break-even point Break-even point BEP formula BEP formula Break even definition Break even definition