Recap Flashcards
(27 cards)
What is an adverse variance?
A difference between budgeted and actual figures that is damaging to the firm’s profit
For example, costs are up or revenue is down.
What is a favourable variance?
A difference between budgeted and actual figures that boosts a firm’s profit
For example, revenue is up or costs are down.
What is an expenditure budget?
Setting a budget to control costs.
What is an income budget?
Setting a minimum revenue to be generated by a product.
What is a profit budget?
Setting a minimum figure for profit to be achieved.
What does SWOT stand for?
Strengths, Weaknesses, Opportunities, Threats.
What are internal factors in SWOT analysis?
Strengths and Weaknesses.
What are external factors in SWOT analysis?
Opportunities and Threats.
Give an example of a strength in a business.
Brand Image / Reputation / Good Communication / Customer Service.
Give an example of a weakness in a business.
High Price / Low Quality.
Give an example of an opportunity for a business.
Gov Subsidies / Grants.
Give an example of a threat to a business.
Gov Tax / Regulations / Competitors.
What is price inelasticity?
The company can charge as much as they want, and people will still buy it.
What is price elasticity?
An increase in price means a fall in demand; a fall in price means an increase in demand.
What is the formula for PED?
PED = % change in quantity demanded / % change in price.
What factors determine price elasticity?
- Availability of substitutes
- Price of competitor goods
- Branding
- Income
- Nature of the good
What is price elastic?
More than 1 – change in demand is more than the change in price.
What is price inelastic?
Less than 1 – change in demand is less than the change in price.
What is unitary price elasticity?
Exactly 1 – change in demand = change in price.
What are economies of scale?
Factors that cause costs per unit to fall when a firm operates on a higher level of production.
How can firms benefit from economies of scale?
By creating more demand for their product.
What is SPICED in relation to exchange rates?
Strong Pound, Imports Cheaper, Exports Dearer.
What is contribution in business?
Total revenue minus variable costs.
How is contribution calculated?
Selling price minus variable costs.
