Edexcel Business A Level Revision

Increasing profitability is often a major aim for growing businesses. There are several ways in which this can be achieved. Businesses are not limited to one of these options but must realise each option has knock on implications. 1) SELL THE SAME AMOUNT AT HIGHER PRICE This will hopefully increase your revenue... HOWEVER , Will you lose customers if prices are raised? What prices do competitors charge? because if you're too high then customers could just go to your competitors as some believe more in a bargain than brand loyalty, so how loyal are your customers? Will you have to spend more on maintaining brand image? Higher prices drives customers away, leaving a bad reputation on the brand so the business may have to maintain its brand image to keep a customer base. This option is only good if the product is price inelastic such as gasoline because the business has a necessity good that consumers don't mind if prices go up a little bit, meaning demand doesn't fall rap...

Sales volume - The amount of sales expressed as a number of units sold Sales revenue - is the amount of sales expressed as the total sum of money spent by consumers. Revenue is the money coming in from the sale of goods and services. Fixed costs - Fixed costs do not change as output varies.  In other words, they are fixed even if output moves up or down from period to period. Variable costs - Costs which change when output changes are called “variable costs” Total costs - Fixed costs + Variable costs Sales volume =Sales revenue / Selling price Sales revenue = selling price x quantity sold Total variable costs = number of units sold x variable cost per unit Total costs = Fixed costs + variable costs     This is what fixed, variable, total costs and revenue would look like on a graph   1) Revenue  Increases with the amount of units sold and therefore starts at 0 and slopes upwards when shown on a graph. 2) Fixed Costs  Fixed ...

Cost-plus pricing - Price is set by applying a percentage margin based on the unit costs of production or supply. Mark up - the amount added to the cost price of goods to cover overheads and profit. If a business wants to operate profitably, then by definition it's pricing must take some account of the costs of production or operation. ▪ Cost is an important influence on pricing ▪ Overtime a price must be more than the related costs in order to make a profit ▪ Popular method of cost-based pricing is " mark-up " - widely used in retailing. An example of basing price using a mark-up approach would be: Total costs for producing 10,000 units = £100,000 Cost per Unit = £10 Add mark up 100% of cost = £10 Selling price = cost + mark up = £20 ADVANTAGES 1) Easy to calculate 2) Price increases can be justified when costs rise 3) Managers can be confident each product is being sold at a profit DISADVANTAGES 1) Ignores price elasticity of de...