Costs & Revenue
It costs money to make things (costs/expenses); you earn money by selling them (revenue); if revenue is more than costs, that's profit; if costs are more, that's a loss
What a learner can do afterwards
- Explain what costs, revenue, and profit mean using a simple example
- Calculate profit from a given scenario (e.g. spent £3 on ingredients, sold cakes for £8, profit = £5)
- Explain what happens if costs are higher than revenue (you make a loss)
The lesson
When you make things to sell, you spend money first to get ready. That spending is called a cost. Maybe you buy lemons, sugar, or paper cups. When someone buys what you made, the money you get back is called revenue.
Sam runs a lemonade stand. He spends £2 on lemons and sugar. That is his cost. He sells cups of lemonade all afternoon and takes in £7. That is his revenue. Profit is revenue minus cost: £7 minus £2 is £5. Sam gets to keep £5.
Sometimes cost is bigger than revenue. If Sam had spent £7 on lemons and sugar but only sold £2 worth of lemonade, he would lose £5 instead of earning it. That is called a loss.
Revenue minus cost equals profit; when cost is bigger instead, that is a loss.
Watch it
Where it sits
This opens up
Where this leads
Jobs that lean on this skill. Follow one to see everything it is built on.
8 questions wait behind this lesson, each with its answer explained. Every answer feeds the sky: stars light as they are learned, and dim when it is time to come back.