Definition

Question 1

Budget

Answer 1

an estimate of income an expenditure for a set period of time.

Question 2

Fixed cost

Answer 2

Cost that must be paid no matter how many products the business makes or sells or how many customers it has e.g a driving instructor must pay tax and insure their cars no matter how many clients they have.

Question 3

Variable cost

Answer 3

These costs are directly related to the number of items sold or produced e.g driving instructors use more fuel if they have more clients because they are on the road more.

Question 4

Sales revenue

Answer 4

Income generated from the sale of a product/service.

Question 5

Break-even point

Answer 5

When the amount of money spent on making the product is the same as the money made from selling the product.

A business hasn’t made either a profit or a loss.

Question 6

Margin of safety

Answer 6

The difference between the target or actual sales and the break-even point.

Question 7

Target sales

Answer 7

The amount of units a business aims to sell.

Question 8

Direct costs

Answer 8

These are the costs that can be easily attributed to each unit of production or each service, provided to a customer e.g. raw material, wages.

Question 9

Indirect costs

Answer 9

Costs that a business must pay that are not influenced by the amount of items produced.