Fixed costs which will remain the same whatever the level of output the business produces. Fixed costs must be paid even if nothing is produced, an example of a fixed cost is rent. Variable costs are costs which vary directly with output of the business, an example of a variable cost is the price of stock. The total cost is the sum the fixed costs and the variable costs. Total costs = fixed costs + variable costs
Capital expenditure which relates to when a business spends on items which may be used over and over again such as a company vehicle. Revenue expenditure which refers to payments for goods and services which have either already been used or will be very soon e.g. wages, raw materials and fuel. Depreciation is also a cost to business and is therefore included in the profit and loss account. It relates to when an asset decreases in value over a period of time and it can therefore be calculated:
Depreciation = Cost of asset – Final value Lifespan of asset Sales revenue or sales turnover is the value of the sales of the business. This is the money coming into the business in return for goods or services provided by the business. The concept of break-even Break-even is the relation of revenue and costs to the output produced. It is when a business moves out of loss and into profit; when the revenues out way the costs.
This can be shown graphically by a break-even chart. The break-even chart identifies the break-even point where the costs and revenues are exactly equal. The main limitation of a break-even chart is that it is difficult to know exactly what the revenues will be. If sales go beyond the break-even point the business will move into profit, however if the sales do not reach the break-even point losses will be incurred. Background information on the theatre
The Broadway Theatre is owned by Hon Brian King who is retired and plays no part in the running of the theatre. Unless the theatre makes more profit he is prepared to sell it to a housing contractor and this would result in the town of Greenfield having no theatre to go to. The theatre is aware that the costs of certain overheads will rise in the next year and this to is a growing concern
The Broadway Theatre is relatively small and is situated on the outskirts of small town called Greenfield. Although Greenfield is fairly small it is expanding rapidly. Over the next two years three housing estates are due to be built and this will attract many more people to the town who are possible customers for the theatre. The theatre it self is located in open grounds that are owned by the local authority. Also located within the grounds is a disused bandstand.
However, most importantly there is no public transport available from the town after 8.00 p.m. How will this background information help me with my task? The background information will aid me in my task as it will help me to identify the key problems with the theatre. It also gives an overall picture of the Broadway Theatre which will help me when proposing developments for the theatre. Investigation I will need to gather as much information from relevant sources as is possible.
The information I will need to gather will include information from other theatres on their staffing structure, and how they promote their theatre and draw custom. This information will help me as it will give me ideas for my proposed development and may also indicate where the Broadway Theatre is going wrong. When collecting my information I will use the following methods to contact theatres: Writing letters, sending questionnaires, sending emails, telephone conversations, and direct interviews.