2.2 Flashcards
Sales forecasting
predicting future sales using past data or market data
Correlation
relationship between 2 variables
Extrapolation
marketing predictions based around trends
Moving averages
smooth out fluctuations in data
Profit formula
revenue - total costs
Revenue formula
selling price x quantity sold
total costs formula
fixed costs + variable costs
Whats the difference between variable and fixed costs?
variable costs formula
Fixed costs dont change depending on output, whilst variables costs do change
Variable cost per unit x quantity sold
What is break even
When a business makes neither a profit or a loss (revenue=total costs)
How do you calculate margin of safety
actual sales or output - break even output
how do you calculate contribution and contribution per unit
Contribution = total sales - total variable costs
contribution per unit = selling price - variable cost per unit
How do you calculate break even output
fixed costs/contribution per unit
What is a budget and what are the 3 types
A financial target
- revenue
-expenditure/costs
-profit
What are the two ways of creating a budget
Historical budget= based on previous years data
Zer based budget= making budgets from scratch
What is variance analysis and how do you calculate it
comparing actual results to the budget
actual - budgeted
What are the 2 types of variance
Favourable = actual is more than budgeted
for revenue and profit, its a good thing if they are favourable
Adverse = actual is less than budgeted
for costs, its a good thing if they are adverse
factors affecting sales forecasting
- consumer trends
- economic variables
- actions of competitors
difficulties with sales forecasting
- market can be dynamic
- requires updating
- accuracy is less accurate for long time periods
- forecast only as good as data put on it
what is contribution
difference between selling price and variable costs per unit. Its used to pay for fixed costs and then provide profits
