Lesson 1

1. Lesson 1

1.2. Explore

Mathematics 30-3 Module 2

Module 2: Number

Explore

This picture shows a gauge similar to a gas gauge, with “Profit” at the top and “Loss” at the bottom.

Hemera/Thinkstock

What you may have discovered in Share 1 is that regardless of the business, there are commonalities in expenses. To cover the cost of expenses, businesses sell products or services to earn revenue.

	Expenses	Revenue
Definition	money required for the business to operate	total money earned by the business
Common Examples	rent wages insurance purchasing merchandise purchasing and maintaining equipment	money from selling merchandise money from selling services

In general, businesses earn sales revenue by selling goods or services. In the course of delivering those goods or services, businesses have associated expenses. If their revenue is higher than their expenses, they make a profit; if their revenue is lower than their expenses, they incur a loss. If their revenue is equal to their expenses, they break even.

This is a picture of coins on a balance. The left side is labelled �revenue� and the right side is labelled �expenses.� There are more coins on the expenses side, which is touching the ground.

This is a picture of coins on a balance. The left side is labelled �revenue� and the right side is labelled �expenses.� There are more coins on the revenue side, which is touching the ground.

The left side is labelled �revenue� and the right side is labelled �expenses.� Each side has the same number of coins.

revenue – expenses = negative

revenue – expenses = positive

revenue – expenses = 0

In Share 1 you had a variety of expenses. These can be categorized as either fixed or variable. Fixed expenses are the same amount and occur at a regular frequency, such as the cost to rent a building per month. Variable expenses are varying amounts that may or may not occur at a regular frequency, such as fuel and repair costs for a vehicle. You may also have fixed and variable revenue. Fixed revenue could come from a long-term contract where you expect the same amount of money each month over an extended period. Variable revenue could come from a one-time contract that you do not expect to be repeated.

In the table, examples are given for these definitions as applied to a small landscaping business.

Revenue	The landscaping business will earn money by providing landscaping services to customers.
Expenses	The company will have many different expenses, including purchasing and maintaining lawn equipment, such as lawnmowers, string trimmers, and power rakes maintaining trucks and trailers to transport equipment, grass clippings, and other compostable material fees to dump grass and other compostable material fuel for machines and vehicles wages for employees insurance for vehicles and the business purchasing fertilizer and other lawn-care products renting a shop to store equipment
Profit (positive profit)	Suppose the business had revenue of $7300 and expenses of $3900 in a month. The profit is positive, so the company had a profit of $3400 that month.
Loss (negative profit)	Suppose the business had revenue of $5400 and expenses of $6100 in a month. The profit is negative, so the company lost $600 that month.
Break Even (zero profit)	Suppose the business had revenue of $6300 and expenses of $6300 in a month. The profit is zero, so the company broke even that month.
Fixed Expenses	Some fixed expenses for the landscaping company include rent insurance wages (if the employees work the same amount each month)
Variable Expenses	Some variable expenses for the landscaping company include fuel machine maintenance cost of lawn products, such as fertilizer
Fixed Revenue	The company has contracts with some customers to cut their lawn every week.
Variable Revenue	The company has some customers who ask for one-time services.

This is a picture of a man loading a wheelbarrow.

BananaStock/Thinkstock

The way money is moving into and out of a business can be summarized by a statement of revenue and expense. A sample statement of revenue and expense for a landscaping business is shown in the following table. Notice that all the revenues are totalled and all the expenses are totalled in the statement. These totals are then used to determine the profit.


September 2013
Income ($)		Expenses ($)
Regular Contracts One-time Contracts	8150 1200	Wages Fuel Repairs Insurance Supplies Rent	3200 365 190 110 680 1400
Total	9350		5945
PROFIT