AQA · GCSE · Business
Course version: 8132 · Version from Sept 2017
Understand the concept of revenue, costs, profit and loss.
Full specification wording
Business planning: understand the concept of revenue, costs, profit and loss.
Revenue is the money a business receives from selling its output, calculated as selling price × quantity sold.
Checked against the AQA 8132 specification (opens in a new tab) on .
- Point 9 of 9
- 4 key terms
Study notes
From the checked teaching notes for this specification point.
The idea
Revenue is the money a business receives from selling its output, calculated as selling price × quantity sold. Costs are the payments made to produce and sell that output, split into fixed costs and variable costs, which together give total costs. Profit is what remains when total costs are lower than revenue: profit = revenue − total costs. Loss occurs when total costs exceed revenue, so the subtraction gives a negative result. For example, selling 400 units at £10 each gives revenue of £4,000; if total costs are £3,500, profit is £4,000 − £3,500 = £500. If total costs rise to £4,500, the business makes a loss of £500. A student should calculate revenue, total costs and then the difference, interpreting a positive result as profit and a negative result as loss, and linking these figures to business planning decisions.
What earns the marks
- Defines revenue as income from sales and calculates it as selling price × quantity sold.
- Defines costs as the payments needed to produce and sell output, including fixed and variable elements.
- States and applies profit = revenue − total costs.
- Identifies loss as the outcome when total costs are greater than revenue and calculates the size of the loss.
- Uses a worked example to show how changing price, quantity sold or costs affects profit or loss.
- Interprets a profit or loss figure in the context of business planning, such as whether a plan is viable.
Common mistakes and how to put them right
Confusing revenue with profit.
Put it right: Subtract total costs from revenue to find profit.
Forgetting to include fixed costs when finding total costs.
Put it right: Add fixed costs to variable costs before subtracting from revenue.
Reporting a loss as a positive number without stating it is a loss.
Put it right: Label the result clearly as a loss and give its size.
Exam tips
- Write the formula you are using before substituting figures, so the examiner can follow your method.
- Keep revenue, total costs and profit or loss as separate steps, and label each answer with its meaning.
- If the result is negative, state that the business has made a loss and give the amount, rather than leaving a bare negative number.
Try the lesson
The start of the Business planning: understand the concept of revenue, costs, profit and loss. lesson, made from checked teaching notes for this specification point.
Have a go first
A business sells 500 hats at £20 each. What is its total revenue?
Listen
Revenue is the money a business receives from selling its output, calculated as selling price × quantity sold. Costs are the payments made to produce and sell that output, split into fixed costs and variable costs, which together give total costs. Profit is what remains when total costs are lower than revenue: profit = revenue − total costs. Loss occurs when total costs exceed revenue, so the subtraction gives a negative result. For example, selling 400 units at £10 each gives revenue of £4,000; if total costs are £3,500, profit is £4,000 − £3,500 = £500. If total costs rise to £4,500, the business makes a loss of £500. A student should calculate revenue, total costs and then the difference, interpreting a positive result as profit and a negative result as loss, and linking these figures to business planning decisions. A strong answer earns marks for these points. Defines revenue as income from sales and calculates it as selling price × quantity sold. Defines costs as the payments needed to produce and sell output, including fixed and variable elements. States and applies profit = revenue − total costs. Identifies loss as the outcome when total costs are greater than revenue and calculates the size of the loss. A common slip: Confusing revenue with profit: the error is treating sales income as profit. Instead, subtract total costs from revenue to find profit. Exam tip: Write the formula you are using before substituting figures, so the examiner can follow your method.
See it
Key words
Say what each word means before you turn the card.
Revenue
Try answering aloud or in your head before turning the card.
Costs
Try answering aloud or in your head before turning the card.
Profit
Try answering aloud or in your head before turning the card.
Loss
Try answering aloud or in your head before turning the card.
See every definition
- Revenue
- The money a business receives from selling its output, calculated as selling price × quantity sold.
- Costs
- The payments made to produce and sell output, split into fixed costs and variable costs, which together give total costs.
- Profit
- What remains when total costs are lower than revenue, calculated as revenue − total costs.
- Loss
- Occurs when total costs exceed revenue, so the subtraction gives a negative result.
Label the diagram
Some boxes have lost their names. Pick the right name for each number.
1Box 1
2Box 2
3Box 3
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