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Business maths: revenue, costs and profit
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Business calculations use maths you already know from KS3: multiplying, adding and taking away money. Getting these right earns easy marks.
Revenue
Revenue is the money a business receives from selling its products.
Revenue = price × quantity sold
A stall sells 120 smoothies at £3.50: revenue = 3.50 × 120 = £420.00.
Revenue = price × quantity sold
A stall sells 120 smoothies at £3.50: revenue = 3.50 × 120 = £420.00.
Costs
Fixed costs stay the same however much is sold, such as rent.
Variable costs rise with each item made, such as fruit and cups.
Total costs = fixed costs + (variable cost per item × quantity)
The stall pays £150 rent and £1.25 per smoothie: total costs = 150 + 1.25 × 120 = £300.00.
Variable costs rise with each item made, such as fruit and cups.
Total costs = fixed costs + (variable cost per item × quantity)
The stall pays £150 rent and £1.25 per smoothie: total costs = 150 + 1.25 × 120 = £300.00.
Profit or loss
Profit = revenue − total costs
420.00 − 300.00 = £120.00.
If costs are bigger than revenue the answer is negative: a loss.
Tips: show every step, write the £ sign, and give money to 2 decimal places when there are pence.
420.00 − 300.00 = £120.00.
If costs are bigger than revenue the answer is negative: a loss.
Tips: show every step, write the £ sign, and give money to 2 decimal places when there are pence.
A car wash charges £8 per car and washes 90 cars in a week. Fixed costs are £300 a week and variable costs are £2 per car. Find the profit.
- Revenue = 8 × 90 = £720
- Total costs = 300 + 2 × 90 = £480
- Profit = 720 − 480 = £240
Answer: £240
Revenue = price × quantity. Total costs = fixed costs + variable cost per item × quantity. Profit = revenue − total costs; a negative answer is a loss.
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