2.2 - Flashcards
(18 cards)
Consumer trends
Habits or behaviour of those involved in the use of goods and services
Economic uncertainty
Where firms/ consumers are unable to predict their future sales/ incomes and costs
Fixed costs
Costs that do not change when output/ sales changes
Sales forecast
A prediction of the expected level of sales volume/ revenue for a business for a future period
Average cost
The cost of producing one unit. Total costs/ output
Revenue
The amount of income for a business generated from its sales. Selling price x quantity sold
Total costs
Total fixed costs plus total variable costs
Sales revenue
Selling price x sales volume
Price multiplied by quantity sold
Break-even
The level of output where the total revenue is equal to the total cost. Fixed costs/ unit contribution
The level of output where the total revenue is equal to the total cost
Variable costs
Costs that vary according to the level of output
Margin of safety
The difference between the current or planned level of output/ sales and the break-even level of output
Unit contribution
Selling price - variable cost per unit
Adverse variance
Negative variance e.g., higher costs than budget
Historical budgeting
A budget based upon previous financial figures
Favorable variance
Positive variance e.g., lower costs than budget
Budget
A financial plan of income and expenditure prepared/ agreed in advance
Zero based budget
A type of budget where no money is allocated for spending unless it has firstly been justified
Variance analysis
Shows the difference between budgeted and actual figures and can be calculated at the end of a financial period, once actual figures are known
