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Maximise profits; increase sales & control costs

Maximise profits; increase sales & control costs

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Transcript

  • 1. Making Profits in Business
  • 2. What’s my line?
    • Complete the following sentence:
    • In commercial businesses The Chief Executive’s 2 most important priorities are:
    • 1 …………………………………………...
    • 2 …………………………………………...
  • 3. 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
  • 4. 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?
  • 5. 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
  • 6. 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…..
  • 7. Costs / Sales / Profits Relationship
  • 8. 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
  • 9.