Making Profits

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Information about Making Profits
Business & Mgmt

Published on November 27, 2008

Author: gallipot

Source: slideshare.net

Description

Maximise profits; increase sales & control costs

Making Profits in Business

What’s my line? Complete the following sentence: In commercial businesses The Chief Executive’s 2 most important priorities are: 1 …………………………………………... 2 …………………………………………...

Complete the following sentence:

In commercial businesses The Chief Executive’s 2 most important priorities are:

1 …………………………………………...

2 …………………………………………...

What’s my line? Answers In commercial businesses The Chief Executive’s 2 most important priorities are: 1 To keep the business solvent / from going bankrupt 2 To make a profit

Answers

In commercial businesses The Chief Executive’s 2 most important priorities are:

1 To keep the business solvent / from going bankrupt

2 To make a profit

Understanding profits I run a business which sells Exercise books I sell the books at 50p each. Last month I sold 40,000 books (£20,000 sales). I made £2,000 profit I want to grow my business, so if I can increase sales to 50,000 books how much profit should I make?

I run a business which sells Exercise books

I sell the books at 50p each.

Last month I sold 40,000 books (£20,000 sales).

I made £2,000 profit

I want to grow my business, so if I can increase sales to 50,000 books how much profit should I make?

Understanding profits I have two sets of costs Fixed costs – like the rent for my warehouse and the lease on my van Variable costs – like the cost of buying the books, and the money I spend on diesel for the van; the more I buy / use the more I spend My revenue comes from my sales My profit = My sales – My costs

I have two sets of costs

Fixed costs – like the rent for my warehouse and the lease on my van

Variable costs – like the cost of buying the books, and the money I spend on diesel for the van; the more I buy / use the more I spend

My revenue comes from my sales

My profit = My sales – My costs

Understanding profits It would be easy to think that if you increase sales by 25% then profits go up by the same amount Actually something much more wonderful happens…. Take a look at the graph on the next page…..

It would be easy to think that if you increase sales by 25% then profits go up by the same amount

Actually something much more wonderful happens…. Take a look at the graph on the next page…..

Costs / Sales / Profits Relationship

Understanding Profits So if I increase sales by 25% 50p / book 40,000 sales = £2,000 profit 50p / book 50,000 sales = £4,875 profit If I increase the price by 50% and can achieve sales 75p / book 40,000 sales = £12,000 profit 75p / book 50,000 sales = £17,375 profit And if I also double the price and achieve sales! £1.00 / book 40,000 sales = £22,000 profit £1.00 / book 50,000 sales = £29,875 profit

So if I increase sales by 25%

50p / book 40,000 sales = £2,000 profit

50p / book 50,000 sales = £4,875 profit

If I increase the price by 50% and can achieve sales

75p / book 40,000 sales = £12,000 profit

75p / book 50,000 sales = £17,375 profit

And if I also double the price and achieve sales!

£1.00 / book 40,000 sales = £22,000 profit

£1.00 / book 50,000 sales = £29,875 profit

 

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