Costs, revenue, Profit

1.2.3 Business costs, revenues and profit a) Definition and use of formulae to calculate: • total revenue • total costs • total fixed costs • total variable costs • average (total) costs • profit. b) Economies of scale: • definition of economies of scale • definition of internal economies of scale • types of internal economies of scale: o purchasing (bulk buying) o marketing o technical o financial o managerial o risk bearing. • definition of external economies of scale • types of external economies of scale: o skilled labour o infrastructure o access to suppliers o similar businesses in area. c) Diseconomies of scale: • definition of diseconomies of scale • types of diseconomies of scale: o bureaucracy o communication problems o lack of control o distance between top management and workers at bottom of the organisation • the use of long run average cost (LRAC) curve diagram, annotated to show internal economies of scale and diseconomies of scale and where the business will be most efficient.