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19 Cards in this Set
- Front
- Back
Sales forecast
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a prediction of likely sales in terms of volume and value over a period of time |
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Contingency plan
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A plan of action devised as an alternative in case a problem arises |
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Fixed costs
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those costs that do not vary in relation to the level of output e.g. rent |
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Variable costs
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those costs that do increase as output increases and more is therefore spent on them e.g. raw materials |
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Total variable costs
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the total sum of money spent on variable costs, often calculated as variable cost per unit x number of units produced |
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Total costs
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Fixed costs + total variable costs |
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Sales revenue
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The money raised from selling products or services, calculated as price per unit x number of units sold |
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Sales volume
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The number of units sold by a particular business |
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Break-even point
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the level of output at which sales revenue and total costs are the same. Neither a profit or a loss is made. |
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Contribution
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The portion of the selling price of a product which contributes to paying off fixed costs. Calculated as selling price per unit - variable cost per unit. |
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Total contribution
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The entire amount of contribution earned from a business' sales over a given time period. Calculated as contribution x number of units sold. |
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Margin of safety
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The amount by which current or forecast output exceeds the level of output necessary to break even. Calculated as current or forecast output - break-even output. |
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Break-even chart
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A chart which can be used to graphically display the revenue, fixed and total costs of a business at various levels of output and show the break-even output
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Income budget
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Setting a minimum figure for the revenue to be generated by a product, department or manager in order to achieve a business' plans
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Expenditure budget
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Setting a maximum figure for what a department of manager can spend over a period of time in order to help achieve the business' plans |
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Adverse variance
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A difference between budgeted and actual figures that is damaging to the firm's profits (for example costs up or revenue down) |
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Favourable variance
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A difference between the budgeted and actual figures that boosts the firm's profits (for example costs down or revenue up)
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Historical budgeting
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Setting budgets for managers or departments based upon previous historical data on revenue earned and costs incurred by that manager or department |
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Zero budgeting
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Setting all future budgets initially at £0 and asking managers to justify the money they believe they need to spend in future |