2.2

Question 1

Definition of Sales Forecast

Answer 1

The prediction of future revenues based on past sales figures

Question 2

4 Focuses of Sales Forecast

Answer 2

-Size of Market
-Volume and Value of Market
-Sales as a result of promotions
-Sales as a result of cyclical factors

Question 3

3 Ways Consumer Trends affect Sales Forecasting

Answer 3

-Seasonal Variations
-Fashion
-Long Term Trends

Question 4

3 Ways Economic Variables affect Sales Forecasting

Answer 4

-Economic Growth
-Inflation
-Unemployment

Question 5

3 Ways Competitors affect Sales Forecasting

Answer 5

-Short term promotions
-Long term changes to products or expansion
-Business Failure

Question 6

3 Difficulties of Sales Forecasting

Answer 6

-Future doesn’t reflect the past
-Too much data
-Interpretation

Question 7

Formula for Sales Revenue

Answer 7

Selling Price * No. Units Sold

Question 8

Definition of Sales Volume

Answer 8

The number of units sold

Question 9

Definition of Sales Revenue

Answer 9

The value of units sold

Question 10

Definition of Fixed Costs

Answer 10

Costs that do not change as the level of output changes

Question 11

Definition of Variable Costs

Answer 11

Costs that vary directly with the output

Question 12

Formula of Total Costs

Answer 12

Fixed Costs + Variable Costs

Question 13

Formula of Average Total Cost

Answer 13

Total Cost / Output

Question 14

Formula of Variable Cost Per Unit

Answer 14

Total Variable Cost / Output

Question 15

Formula of Total Variable Cost

Answer 15

Variable Cost * Output

Question 16

Definition of Contribution

Answer 16

The amount that helps to pay off the fixed costs of the business

Question 17

Formula of Contribution Per Unit

Answer 17

Selling price per unit - Variable cost per unit

Question 18

Formula of Total Contribution

Answer 18

Contribution Per Unit * No. Units Sold

Question 19

Definition of Break Even Point

Answer 19

Where total revenue for a product is equal to its total costs, so no profit or loss

Question 20

Formula for Break Even Point

Answer 20

Fixed Costs / Contribution

Question 21

Definition of Margin of Safety

Answer 21

The difference between actual output and its break even output

Question 22

Formula of Margin of Safety

Answer 22

Actual output - Break even output

Question 23

5 Limitations of Break Even Analysis

Answer 23

-Businesses produce more than 1 product
-Assumes all output is sold
-Cannot be easily amended
-Revenue and TC isn’t always a linear relationship
-Accuracy depends on quality of data

Question 24

Definition of a Budget

Answer 24

A financial plan that a business sets about costs and revenue

Question 25

4 Reasons to use a Budget

Answer 25

-Planning and Monitoring
-Control
-Coordination and Communication
-Motivation and Efficiency

Question 26

Definition of a Historical Budget

Answer 26

A budget that uses previous years figures and external economic factors

Question 27

Definition of a Zero Based Budget

Answer 27

A budget that is reset every year so spending has to be justified

Question 28

Definition of Budget Variance

Answer 28

The difference between a figure budgeted and the actual figure achieved

Question 29

What is Adverse Variance

Answer 29

Adverse is when the actual figure is worse than budgeted
Profit is lower than budgeted OR
Cost is higher than budgeted

Question 30

What is Favourable Variance

Answer 30

Favourable is when the actual figure is better than budgeted
Profit is higher than budgeted OR
Cost is lower than budgeted

Question 31

Definition of Variance Analysis

Answer 31

The process of determining reasons for the differences in the actual and budgeted figures

Question 32

How is favourable variances treated

Answer 32

-Cost = may review quality, returns and wastage
-Sales = may reward client based staff

Question 33

How is adverse variances treated

Answer 33

-Cost = Seek alternative suppliers
-Sales = Review Marketing

Question 34

6 Difficulties of Budgeting

Answer 34

-Time
-Competition and conflict
-Only as good as data
-Focus on short term than long term
-Unachievable or unambitious
-Setters have a significant influence