Sales revenue:
Number of items sold x Selling price
(The result is in £'s)
Sales volume:
Sales revenue ÷
Selling price
(The result is in units sold)
| Fixed, variable and total costs. |
Fixed costs (FC) are the expenses that do not alter in relation to changes in output.
Examples:
Repayment of a bank loan (with interest) would be a fixed cost for the duration of the loan.
A one year loan of £10,000 at an interest rate of 10% per annum (p.a.) would require the payment of £1,000 in interest.
Variable costs (VC): expenses that vary in direct proportion to changes in output.
Examples:
Average variable cost (AVC):
Total Variable Cost ÷
Number of units produced
Total costs = FC + VC
