Explains sales revenue, how to increase sales revenue, sales volume, sales forecasting, factors affecting sales forecasting, and the different types of costs (fixed, variable and total)
Theme 2 Topic 9
Sales Forecasting, Sales Revenue & Costs
Sales Revenue
Sales Revenue – all the money received from selling the products and services before costs are deducted
Price x Number of Items Sold
Sales revenue can also be described as:
Income
Total revenue
Sales turnover or turnover
Sales
Revenue
A Firm Seeking to Increase its Revenue Can:
1) Change the price of their product
2) Sell more products
However, if costs also increase the business won’t make more of a profit
Sales Volume
Sales Volume – the number of products or services a business sells
Sales Revenue
Selling Price
Sales Forecast
Sales Forecasting – accurately estimating sales revenue for the future
The Purpose of Sales Forecasts: Factors Affecting Sales Forecasts:
Plan ahead Seasonal demand
Know how many products will need to sell Competition
To keep track of inflows/outflows Economy/interest rates
To predict demand
Makes a business more likely to get a loan
Difficulties of Sales Forecasting:
Forecasts are not guaranteed
Businesses operating in dynamic markets will find it significantly more difficult to forecast
accurately beyond a very short period of time in the future
Costs
Fixed Costs – costs that DO NOT vary directly with output in the short-run, e.g. rent, salaries, administrative
costs
Not affected in the short term by small changes in output
In the long term, fixed costs will change if the level of output increases significantly
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