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How do revenue and costs combine to give profit, and how is each calculated?

Revenue, costs and profit: total revenue, fixed costs, variable costs and total costs, the calculation of profit and loss, and the importance of profit to a business.

A focused answer to the WJEC GCSE Business content on revenue, costs and profit, covering total revenue, fixed, variable and total costs, the calculation of profit and loss, and why profit matters to a business.

Generated by Claude Opus 4.812 min answer

Reviewed by: AI editorial process; not yet individually human-reviewed

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  1. What this dot point is asking
  2. Revenue
  3. Fixed, variable and total costs
  4. Profit and loss
  5. The importance of profit
  6. Why this matters
  7. Try this

What this dot point is asking

WJEC wants you to handle the building blocks of business finance: total revenue, fixed costs, variable costs and total costs, the calculation of profit and loss, and the importance of profit. These formulas are the foundation for break-even, cash flow and financial statements, so they must be second nature, and the calculations are reliable marks on the paper.

Revenue

So selling 500 items at 12 each gives a revenue of 500×12=6,000500 \times 12 = 6{,}000.

Fixed, variable and total costs

Profit and loss

The importance of profit

Why this matters

These formulas are the foundation of the whole finance topic: break-even uses revenue and costs, cash flow tracks money in and out, and the income statement is built from revenue, costs and profit. The distinction between fixed and variable costs reappears in break-even and contribution. Exam questions reward accurate calculation and correct labelling of costs, so practise until revenue, total costs and profit are automatic.

Try this

Q1. A business sells 800 units at 25 each. Calculate its total revenue. [1 mark]

  • Cue. 25×800=20,00025 \times 800 = 20{,}000.

Q2. Fixed costs are 10,000 and total variable costs are 14,000. The business earns revenue of 30,000. Calculate its profit. [2 marks]

  • Cue. Total costs =10,000+14,000=24,000= 10{,}000 + 14{,}000 = 24{,}000; profit =30,000−24,000=6,000= 30{,}000 - 24{,}000 = 6{,}000.

Exam-style practice questions

Practice questions written in the style of WJEC exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.

WJEC (Unit 1)3 marksA business sells 2,000 units at 15 each. Its total costs are 24,000. Calculate its total revenue and its profit. Show your working.
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A 3-mark AO2 calculation. Reward the method and the answers.

Total revenue is price times quantity sold: 15×2,000=30,00015 \times 2{,}000 = 30{,}000.

Profit is total revenue minus total costs: 30,000−24,000=6,00030{,}000 - 24{,}000 = 6{,}000.

Markers award a mark for the correct revenue, a mark for the method (revenue minus costs), and a mark for the profit of 6,000. A common error is to forget to subtract costs, or to confuse revenue with profit.

WJEC (Unit 1)4 marksExplain the difference between fixed costs and variable costs, with an example of each.
Show worked answer →

A 4-mark AO1 and AO2 question. Reward the definitions and the examples.

Fixed costs do not change with the level of output, so they stay the same whether the business produces a lot or a little; for example rent, which must be paid even if nothing is made.

Variable costs change directly with output, rising as more is produced and falling as less is produced; for example raw materials, because making more units uses more materials.

Markers reward each definition and a correct example, two marks each. A common error is to swap the examples, for example calling rent a variable cost.

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