​3.7 Firms costs, revenues and objectives

  1. Big idea: To be confident in the use of language and calculations required by businesses to assess the profitability and health of their operations. 
  2. You will be able to define total cost (TC), average total cost (ATC), fixed cost (FC), variable cost (VC), average fixed cost (AFC) and average variable cost (AVC).
  3. You will be able to define, draw and interpret diagrams that show how changes in output affect costs of production and perform simple calculations.
  4. You will be able to define total revenue (TR) and average revenue (AR) and be able to calculate TR and AR.
  5. ​Finally you will be able to illustrate how important sales are on revenue and draw a profit and loss diagram.
LESSON 1: COSTS, REVENUES AND PROFITS
ACTIVITY 1: How healthy are these businesses? Review some of the following business news stories over the past few weeks. Assess how healthy these businesses are. How do you know? What do you need to know in order to asses the health of a business?

Tops and joggers in as Boohoo lockdown sales boom

Online fashion retailer Boohoo says it has found a new way of thriving in the coronavirus lockdown - by making people look good on video conference calls. The firm said it had seen a rise in sales of smart tops, as people working from home needed to keep up appearances on camera in front of their colleagues.

Airbus boss warns company is 'bleeding cash'

The chief executive of Airbus has reportedly issued a stark assessment of the impact of the coronavirus pandemic on the plane maker. In a letter to workers, seen by news outlets, Guillaume Faury is said to have warned the company was "bleeding cash at an unprecedented speed".

Amazon crosses $1 trillion again after crushing holiday quarter with $87.4B in revenue

Shares of Amazon rose 12 percent in after-hours trading after the company beat expectations for holiday quarter and revealed that there are 150 million Prime members. Revenue: Amazon posted $87.4 billion in revenue, up 21 percent from the year-ago quarter. Analysts expected $86.15 billion. Total...
ACTIVITY 2: Read pages 231 to 240 in the textbook to gain an understanding of the key definitions and  calculations for costs, revenues and profits and fill in the gap filler as you go:
production_costs_and_revenue_gap_filler.docx
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ACTIVITY 3: You are now going to play the role of a Chief Financial Officer (CFO) of a medium sized business manufacturing baseball bats. In this activity you will need to use the definitions you have learnt, complete calculations and use enterprise thinking to give advice to a firm to maximize their profitability. Open the handout below and complete the questions in order. Remember you have all the information that you need to be able to do this from the gap-filler you completed in activity  2 and from pages 231-240 in the textbook.
production_costs_and_revenue_baseball.docx
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Additional Resources: Pages 231-240 of the Textbook:
Pages 231 -240
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