introduction to profit part 11. starter what is the “cost of sales”? what is profit?

INTRODUCTION TO PROFIT

Part 11

Starter

What is the “cost of sales”?

What is Profit?

Lesson Objective

To be able to define the cost of sales.

To be able to define and calculate gross profit from a formula.

Activity 1

£3 + £2 = £5

(£3 x 15) + (£2 x 15) = £45 + £30 = £75

Activity 2

£1 + £2 + £1.50 + £5.50 + £5 = £15

(£1 x 5) + (£2 x 5) + (£1.50 x 5) + (£5.50 x 5) + (£5 x 5) = £5 + £10 + £7.50 + £27.50 + £25 = £75

L/O: Calculate cost of sales

Gross Profit

Revenue – Cost of Sales = Gross Profit

The money made from selling a product (the revenue), AFTER the cost of producing the product (the cost of sales) has been deducted.

E.g. It costs me £10 to make a table and I sell it for £16. Therefore, my Gross Profit is £6.

Activity 3

Revenue = £200

Cost of Sales = £100

Gross profit = £200 - £100 = £100

L/O: Calculate Gross Profit

Activity 4

10 x £25 = £250 = revenue10 x £15 = £150 = cost of sales£250 - £150 = £100 = gross profit

17 x £25 = £425 = revenue17 x £15 = £255 = cost of sales£425 - £255 = £170 = gross profit

L/O: Calculate Gross Profit

Activity 5 L/O: Identify cost of sales

Activity 6

1. (£2 x 2) + £0.50 + £0.50 + £4 = £9

2. £9 x 15 = £135 = cost of sales

3. Revenue = 15 x £16 = £240Gross Profit = £240 - £135 = £105

L/O: Calculate Gross Profit

Recap