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Revenue, Costs and Break-Even Analysis

Business Studies IGCSE Year 10

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45 views4 pages

Revenue, Costs and Break-Even Analysis

Business Studies IGCSE Year 10

Uploaded by

joanchoong6
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Quiz

Analysis of revenue and costs, Break-even quantity

The break-even point of production is where total costs and total


revenue cross. The business must therefore sell 1000 pairs of shoes
in order to avoid making a loss.
At production below the break-even point, the business is making a
loss. At production above the break-even point, it makes a profit.
Maximum profit is made when maximum output is reached and this is
a profit level of $5000.

Costs and sales Sales revenue


revenue ($)

Profit

Break-even point Total costs

variable costs

Fixed costs

Output
0
Break-even quantity

Now we can plot the information on the graph. Note the


following points:
• The y-axis (the vertical axis) measures money amounts –
costs and revenue.
• The x-axis (the horizontal axis) shows the number of units
produced and sold.
• The fixed costs do not change at any level of output.
• The total cost line is the addition of variable costs and fixed
costs.

Break-even charts concentrate on the break-even point of


production,

The simple charts used in this section have assumed that costs
and revenues can be drawn with straight lines. This will not often
be the case; for example, increasing output to the capacity of a
factory may involve paying overtime wage rates to production
workers. This will make the variable cost line slope more steeply
upwards as output expands. Also, in order to increase sales a
business may need to offer discounts for large orders and this will
cause the slope of the revenue line to be less steep.

1) What is the role of marketing in an organisation?

2) What is the importance of the Unique Selling Point (USP) of your product??

3) What are the differences that exist between consumer products and consumer services?
Give an example for each category.
4) List 3 stages of a hair shampoo product lifecycle before the product reaches the Decline
stage.

5) List two benefits of using the Product lifecycle graph for a Marketing department managers who
is making a Marketing plan for an organisation which sells household items.

6), Give an example of a medium term objective of an organisation which sells toys to
children.

7) Draw the product lifecycle graph for a normal toy made of an environmentally-friendly
material . Use the information here.

Year 1 Product launch


Year 2 Product growth
Year 5 Maturity
Year 6 Decline

The highest sales revenue for this toy was US 2,5 million dollars in Year 4, but the sales was
only US 1.3 million dollars in Year 6

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