Source: https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-3-2-profit-average-unit-cost-and-interest [Revision notes](https://senecalearning.com/en-gb/revision-notes.md) › [IGCSE](https://senecalearning.com/en-gb/revision-notes/igcse.md) › [Business](https://senecalearning.com/en-gb/revision-notes/igcse/business.md) › [Edexcel IGCSE](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse.md) › Profit, Average Unit Cost & Interest # Profit, Average Unit Cost & Interest Business: Edexcel IGCSE, topic 3.3.2 ## Profit, Average Unit Cost and Interest Profit is the amount of money that the business makes, when taking into account costs. It is in effect, a surplus. ### Profit ![Profit](https://image-v2.cdn.app.senecalearning.com/2018-03/83b09016-206e-441a-95a8-c96e7eff7094/shutterstock_184487681.jpg) - Profit = total revenue – total costs. - This is a simple and yet very important formula. - If revenue is greater than costs, a company will make a profit. - If costs are greater than revenue, a company will make a loss. ### Average unit cost ![Average unit cost](https://image-v2.cdn.app.senecalearning.com/2018-03/b531dc5e-274f-4d4e-8d7d-55c7221ea941/shutterstock_149305835.jpg) - Average unit cost = total cost ÷ output (total number of units produced). - This gives a business an idea of what price they need to charge. - In order to make a profit on each item, they need to charge a price that is more than the average unit cost. ### Interest ![Interest](https://image-v2.cdn.app.senecalearning.com/2018-03/a7fca1e7-cd9d-402d-a7fa-1871ee50f1a3/shutterstock_613650095.jpg) - When you borrow money, you usually pay back more than you borrowed. This extra amount is known as the interest on the loan and it is the percentage of the loan that is charged as extra. - Interest = interest rate x the size of the loan. - So, if a business borrows £200 at an interest rate of 5%. Then the interest they pay on the loan each year is 200 x 0.05 = £10. ## Test yourself on Profit, Average Unit Cost & Interest - What is the equation for profit? - If a hot dog van has a total cost of £1500 and produces an output of 750 hotdogs, what is the average unit cost of 1 hot dog? - If a business borrows a loan of £9,000 at an interest rate of 2%, how much interest will they pay on the loan each year? [Practise this topic for free](https://app.senecalearning.com/classroom/course/842fa0dc-132a-4180-9456-45b3931aca6b/section/508b1bee-6dcb-45be-b7df-59b3bcbe6266/session) - Previous topic: [3.3.1 Costs, Revenue & Profit](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-3-1-costs-revenue-and-profit.md) - Next topic: [3.3.3 Costs - Calculations](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-3-3-costs-calculations.md) ## Business: Edexcel IGCSE contents ### 1 Business Activity & Influences on Business - 1.1 Business Objectives - [1.1.1 Business Aims](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-1-1-business-aims.md) - [1.1.2 Business Objectives](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-1-2-business-objectives.md) - [1.1.3 Business Objectives Change Over Time](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-1-3-business-objectives-change-over-time.md) - [1.1.4 End of Topic Test - Business Aims](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-1-4-end-of-topic-test-business-aims.md) - [1.1.5 Diagnostic Misconceptions - Profit](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-1-5-diagnostic-misconceptions-profit.md) - 1.2 Types of Organisations - [1.2.1 Sole Traders & Partnerships](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-2-1-sole-traders-and-partnerships.md) - [1.2.2 Limited Companies](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-2-2-limited-companies.md) - [1.2.3 Limited Liability](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-2-3-limited-liability.md) - [1.2.4 Unlimited vs Limited Liability](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-2-4-unlimited-vs-limited-liability.md) - [1.2.5 Not For Profit & Franchises](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-2-5-not-for-profit-and-franchises.md) - [1.2.6 Multinational Companies](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-2-6-multinational-companies.md) - [1.2.7 End of Topic Test - Business Ownership](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-2-7-end-of-topic-test-business-ownership.md) - [1.2.8 Application Questions - Business Ownership](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-2-8-application-questions-business-ownership.md) - [1.2.9 Diagnostic Misconceptions - Company vs Business](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-2-9-diagnostic-misconceptions-company-vs-business.md) - [1.2.10 Diagnostic Misconceptions - Owners vs Shareholders](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-2-10-diagnostic-misconceptions-owners-vs-shareholders.md) - 1.3 Classification of Businesses - [1.3.1 Sectors](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-3-1-sectors.md) - 1.4 Decisions on Location - [1.4.1 Location](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-4-1-location.md) - 1.5 Business & the International Economy - [1.5.1 Globalisation](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-5-1-globalisation.md) - [1.5.2 Exchange Rates](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-5-2-exchange-rates.md) - 1.6 Government Objectives & Policy - [1.6.1 Government Objectives](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-6-1-government-objectives.md) - [1.6.2 The Government & Business Activity](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-6-2-the-government-and-business-activity.md) - [1.6.3 Interest Rates](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-6-3-interest-rates.md) - [1.6.4 Interest Rates - Calculations](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-6-4-interest-rates-calculations.md) - [1.6.5 Diagnostic Misconceptions - Recessions](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-6-5-diagnostic-misconceptions-recessions.md) - 1.7 External Factors - [1.7.1 External Factors](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-7-1-external-factors.md) - 1.8 What Makes a Business Successful? - [1.8.1 Measuring Success](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-8-1-measuring-success.md) - [1.8.2 Reasons for Failure](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-8-2-reasons-for-failure.md) ### 2 People in Business - 2.1 Internal & External Communication - [2.1.1 Communication](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-1-1-communication.md) - 2.2 Recruitment & Selection Process - [2.2.1 Types of Employment](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-2-1-types-of-employment.md) - [2.2.2 Recruitment Stages](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-2-2-recruitment-stages.md) - [2.2.3 Effective Recruitment](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-2-3-effective-recruitment.md) - [2.2.4 Legal Controls Over Employment](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-2-4-legal-controls-over-employment.md) - [2.2.5 Diagnostic Misconceptions - Internal Recruitment](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-2-5-diagnostic-misconceptions-internal-recruitment.md) - 2.3 Training - [2.3.1 Training](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-3-1-training.md) - 2.4 Motivation & Rewards - [2.4.1 Motivation in the Workplace](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-4-1-motivation-in-the-workplace.md) - [2.4.2 Financial & Non-Financial Methods](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-4-2-financial-and-non-financial-methods.md) - [2.4.3 End of Topic Test - The Workforce](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-4-3-end-of-topic-test-the-workforce.md) - [2.4.4 Application Questions - The Workforce](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-4-4-application-questions-the-workforce.md) - [2.4.5 Diagnostic Misconceptions - Money](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-4-5-diagnostic-misconceptions-money.md) - 2.5 Organisation Structures - [2.5.1 Organisational Structures](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-5-1-organisational-structures.md) - [2.5.2 Centralised vs. Decentralised Structures](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-5-2-centralised-vs-decentralised-structures.md) - [2.5.3 Tall & Flat Organisations](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-5-3-tall-and-flat-organisations.md) - [2.5.4 Functional Areas Within a Business](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-5-4-functional-areas-within-a-business.md) - [2.5.5 End of Topic Test - Org Structure](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-5-5-end-of-topic-test-org-structure.md) ### 3 Business Finance - 3.1 Sources of Finance - [3.1.1 Internal & External Sources of Finance](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-1-1-internal-and-external-sources-of-finance.md) - [3.1.2 Factors Affecting Sources of Finance](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-1-2-factors-affecting-sources-of-finance.md) - 3.2 Cash Flow Forecasting - [3.2.1 Cash Flow](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-2-1-cash-flow.md) - [3.2.2 Consequences of Cash Flow Problems](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-2-2-consequences-of-cash-flow-problems.md) - [3.2.3 Cash Flow - Calculations](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-2-3-cash-flow-calculations.md) - [3.2.4 Solutions to Cash Flow Problems](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-2-4-solutions-to-cash-flow-problems.md) - [3.2.5 Diagnostic Misconceptions - Cash Flow](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-2-5-diagnostic-misconceptions-cash-flow.md) - 3.3 Cost & Break-Even Analysis - [3.3.1 Costs, Revenue & Profit](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-3-1-costs-revenue-and-profit.md) - [3.3.2 Profit, Average Unit Cost & Interest](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-3-2-profit-average-unit-cost-and-interest.md) - [3.3.3 Costs - Calculations](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-3-3-costs-calculations.md) - [3.3.4 Revenue - Calculations](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-3-4-revenue-calculations.md) - [3.3.5 Break-Even Analysis](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-3-5-break-even-analysis.md) - [3.3.6 Profit & Losses - Calculations](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-3-6-profit-and-losses-calculations.md) - [3.3.7 End of Topic Test - Finance](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-3-7-end-of-topic-test-finance.md) - [3.3.8 Grade 9 - Finance](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-3-8-grade-9-finance.md) - [3.3.9 Diagnostic Misconceptions - Fixed Costs](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-3-9-diagnostic-misconceptions-fixed-costs.md) - [3.3.10 Diagnostic Misconceptions - Break-even](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-3-10-diagnostic-misconceptions-break-even.md) - 3.4 Financial Documents - [3.4.1 Financial Statements](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-4-1-financial-statements.md) - [3.4.2 Income Statement](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-4-2-income-statement.md) - [3.4.3 Understanding Business Performance](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-4-3-understanding-business-performance.md) - 3.5 Account Analysis - [3.5.1 Business Calculations](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-5-1-business-calculations.md) - [3.5.2 Gross Profit - Calculations](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-5-2-gross-profit-calculations.md) - [3.5.3 Net Profit - Calculations](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-5-3-net-profit-calculations.md) - [3.5.4 Business Calculations 2](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-5-4-business-calculations-2.md) - [3.5.5 Business Calculations 3](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-5-5-business-calculations-3.md) - [3.5.6 Liquidity](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-5-6-liquidity.md) ### 4 Marketing - 4.1 Market Research - [4.1.1 Market Research](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-1-1-market-research.md) - [4.1.2 Forms of Market Research](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-1-2-forms-of-market-research.md) - 4.2 The Market - [4.2.1 Customer Needs](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-2-1-customer-needs.md) - [4.2.2 Satisfying Customer Needs](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-2-2-satisfying-customer-needs.md) - [4.2.3 Market](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-2-3-market.md) - [4.2.4 The Competitive Environment](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-2-4-the-competitive-environment.md) - [4.2.5 Market Segmentation](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-2-5-market-segmentation.md) - [4.2.6 Market Mapping - Price vs Quality](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-2-6-market-mapping-price-vs-quality.md) - [4.2.7 End of Topic Test - Marketing](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-2-7-end-of-topic-test-marketing.md) - [4.2.8 Application Questions - Marketing](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-2-8-application-questions-marketing.md) - [4.2.9 Diagnostic Misconceptions - Competition](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-2-9-diagnostic-misconceptions-competition.md) - 4.3 The Marketing Mix - [4.3.1 Price](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-1-price.md) - [4.3.2 Price Penetration](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-2-price-penetration.md) - [4.3.3 Other Forms of Pricing](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-3-other-forms-of-pricing.md) - [4.3.4 Product Design](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-4-product-design.md) - [4.3.5 The Product Life Cycle](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-5-the-product-life-cycle.md) - [4.3.6 Extending Existing Products](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-6-extending-existing-products.md) - [4.3.7 New Products](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-7-new-products.md) - [4.3.8 Benefits and Risks of New Products](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-8-benefits-and-risks-of-new-products.md) - [4.3.9 Promotion](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-9-promotion.md) - [4.3.10 Public Relations and Sales Promotion](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-10-public-relations-and-sales-promotion.md) - [4.3.11 Sponsorship & Social Media](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-11-sponsorship-and-social-media.md) - [4.3.12 Product Placements](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-12-product-placements.md) - [4.3.13 Promotional Mix](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-13-promotional-mix.md) - [4.3.14 Place](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-14-place.md) - [4.3.15 Place 2](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-15-place-2.md) - [4.3.16 Place 3](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-16-place-3.md) - [4.3.17 M-Commerce](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-17-m-commerce.md) - [4.3.18 Benefits & Drawbacks of M-Commerce](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-18-benefits-and-drawbacks-of-m-commerce.md) - [4.3.19 End of Topic Test - Marketing Mix](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-19-end-of-topic-test-marketing-mix.md) - [4.3.20 Grade 9 - Marketing Mix](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-20-grade-9-marketing-mix.md) - [4.3.21 Diagnostic Misconceptions - Decreasing Price](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-21-diagnostic-misconceptions-decreasing-price.md) - [4.3.22 Diagnostic Misconceptions - Advertise vs Promote](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-22-diagnostic-misconceptions-advertise-vs-promote.md) - [4.3.23 Diagnostic Misconceptions - Social Media](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-23-diagnostic-misconceptions-social-media.md) ### 5 Business Operations - 5.1 Economies & Diseconomies of Scale - [5.1.1 Economies of Scale](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/5-1-1-economies-of-scale.md) - [5.1.2 Diagnostic Misconceptions - Economies of Scale](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/5-1-2-diagnostic-misconceptions-economies-of-scale.md) - 5.2 Production - [5.2.1 Production Processes](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/5-2-1-production-processes.md) - [5.2.2 Flow and Batch Production](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/5-2-2-flow-and-batch-production.md) - [5.2.3 Production Efficiency](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/5-2-3-production-efficiency.md) - [5.2.4 Technology & Production](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/5-2-4-technology-and-production.md) - [5.2.5 Diagnostic Misconceptions - JIT vs JIC](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/5-2-5-diagnostic-misconceptions-jit-vs-jic.md) - 5.3 Factors of Production - [5.3.1 Factors of Production](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/5-3-1-factors-of-production.md) - 5.4 Quality - [5.4.1 Importance of Quality](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/5-4-1-importance-of-quality.md) - [5.4.2 Identifying Quality](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/5-4-2-identifying-quality.md) - [5.4.3 Total Quality Management](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/5-4-3-total-quality-management.md) - [5.4.4 End of Topic Test - Operational Decisions](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/5-4-4-end-of-topic-test-operational-decisions.md)