Heading Example Definition

Revenues £500,000 Volume sold x price per unit,

for each product line
Variable costs £200,000 For example: raw materials,
direct labour, direct
advertising, royalties (these
all vary based on the number
of units sold)
Gross Profit £300,000 or 60% (as a % of = Revenues – Variable costs
Revenues)
Fixed Costs £250,000 For example: rent, rates,
utilities, Selling, General and
Administrative costs (SG&A) –
these are all fixed and do not
vary with the activity levels
Operating Profit £50,000 or 10% (as a % of = Gross profit – Fixed costs
Revenues)
Non-operating costs £30,000 For example: tax, Interest on
loans, Dividends, Depreciation
(i.e. the cost of writing off the
expensive equipment the
organisation has bought)
Net Profit £20,000 = Operating Profit – Non-
operating costs

NB: The numbers above are all examples for a mythical, profitable business. There are several terms
for the same heading e.g. “Margin” instead of “Profit”. What’s included in fixed and variable costs can
vary depending on the industry and product. In a case study you’ll usually stop at Operating Profit.