2-4-1-Business-Calculations

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Exam code:1BS0

Profit calculations

Profit is the reward for the risk that entrepreneurs take in proving a product/service
The two main types of profit are gross profit and net profit
Gross profit takes into account the expenses directly incurred in the cost of production and is calculated as follows

$Gross space profit space equals space Sales space revenue space minus space Cost space of space sales$

Net profit takes into account all of the business expenses and is calculated as follows

$space Net space profit space equals space Gross space profit space minus space left parenthesis Operating space expenses space plus space Interest right parenthesis$

Worked Example

A small skateboard manufacturer sells its products to retailers for £35 per unit. Variable costs are 2/5ths of the selling price, with monthly fixed costs being £4,200. It sells 1,200 skateboards a month.

Calculate the business’s net profit for the year.

(4)

Step 1: Calculate the variable cost per unit

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Business GCES EDEXCEL

2-4-1-Business-Calculations

Profit calculations

Worked Example

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