3.1.4.4 Profit

• Gross profit is calculated as Total Revenue minus the Cost of Goods Sold
• What are the expenses deducted to calculate net profit?

  All costs
• Match the profit type with its calculation:

  Accounting Profit ↔️ Total Revenue - Explicit Costs

  Economic Profit ↔️ Total Revenue - (Explicit Costs + Implicit Costs)
• What is the formula for calculating profit?

  Profit = Total Revenue - Total Costs
• How is accounting profit calculated?

  Total Revenue - Explicit Costs
• Accounting profit considers opportunity costs, whereas economic profit does not.

  False
• Economic profit includes both explicit and implicit costs in its calculation.
• What is the primary use of accounting profit in business decision-making?

  Financial reporting and tax
• If a restaurant owner could have earned £30,000 as a chef elsewhere, this is considered an explicit cost.

  False
• Total cost is the sum of fixed costs and variable costs.
• What is the formula for calculating profit?

  Total Revenue - Total Costs
• What is the formula for profit?

  $Profit =$$Total Revenue - Total Costs$
• What is the formula for calculating profit?

  Profit = Total Revenue - Total Costs
• Net profit is calculated by subtracting all expenses, including taxes, from total revenue.


  True
• Total revenue is calculated by multiplying the price by the quantity
• Implicit costs are the opportunity costs of using resources, such as the salary a business owner could have earned elsewhere.


  True
• Total revenue is calculated by multiplying the price by the quantity
• Economic profit considers both explicit and implicit costs.


  True
• Economic profit is calculated by subtracting both explicit and implicit costs from total revenue.
• What do implicit costs represent in economic profit calculations?

  Opportunity costs of resources
• Economic profit considers the potential earnings a business owner could have made elsewhere.


  True
• If a restaurant has a total revenue of £100,000 and explicit costs of £60,000, its accounting profit is £40,000.
• How is total revenue calculated?

  Price x Quantity
• Variable costs remain constant regardless of the level of output.

  False
• Gross profit is calculated by subtracting the cost of goods sold from total revenue.
• Total Revenue is the product of the price per unit and the quantity
• What is the Total Revenue if 500 units are sold at £10 each?

  £5,000
• The Total Costs in the example are £1,500 fixed costs plus the product of £3 variable cost per unit and 500 units, resulting in £3,000
• There are two types of profit: Gross Profit and Net Profit.


  True
• Net Profit is calculated by deducting all expenses, including cost of goods sold, operating expenses, and taxes
• Net Profit measures overall profitability after deducting all expenses.

  True
• What is the Net Profit of a tech company with total revenue of £200,000 and total costs of £150,000?

  £50,000
• Economic Profit takes into account both explicit and implicit costs.
• A restaurant has total revenue of £100,000 and explicit costs of £60,000. What is the Accounting Profit?

  £40,000
• Total Revenue is calculated by multiplying the price by the quantity sold.


  True
• Total Cost is calculated by adding together fixed costs and variable costs.
• Fixed Costs do not change with the level of output.


  True
• A company has fixed costs of £2,000 and variable costs of £1 per unit. If they produce 1,000 units, what is the Total Cost?

  £3,000
• Total Costs include both fixed and variable costs.

  True
• What is the formula for calculating profit in its simplest form?

  $Profit =$$Total Revenue - Total Costs$