Profitability and unprofitability

UNIT 27

Sales and costs

Sales-the goods and services that a business sells, and the money it receives for them from customers.

Sales director - in charge of the sales department.

Revenue or turnover - money from sales.

Sales volume -unit sales.

The sales ( in shops) - are a period when goods are sold more cheaply than at other times.

Costs- the amounts of money that a business spends.

Direct costs- costs are directly related to providing the product, e.g. salaries.

Direct production costs- costs of raw materials, labour, etc.

Fixed costs -do not change when production goes up or down, e.g. rent, heating, etc.

Variable costs - change when production goes up or down, e.g. materials.

Cost of goods sold (COGS) - are the variable costs in making particular goods.

Overheads, overhead costsor indirect costs -are not directly related to production, e.g. administration.

Expenses or operating expenses - some costs, especially indirect ones.

Costing - is the activity of calculating costs.

Costings- amounts calculated for particular things.

Gross margin= selling price – direct production costs.

Net margin, profit margin or mark-up- selling price – total costs. (The net margin or profit margin is usually given as a percentage of the selling price; The mark-up is usually given as a percentage of the total costs).

 

UNIT 28

Make a profit - the product is profitable or profit-making.

Break even -reach break-even point.

Money spinners or cash cows – products that have very good profitability.

Budgeted for – the money that they planned to spend on marketing activities.

Underspent -under budget.

Overspent- over budget.

Diseconomies of scale – an even bigger increase in production costs.

Experience curve or learning curve – as company produces more, it learns how to do things more and more quickly and efficiently.