2.2 keywords

Question 1

sales forecasting

Answer 1

The process of predicting future sales volumes and values using a range of strategies, e.g. exploration of trends and test markets.

Question 2

consumer trends

Answer 2

The changes in the buying habits of consumers that will influence business decisions.

Question 3

sales volume

Answer 3

The amount of sales expressed as the number of units sold.

Question 4

sales revenue

Answer 4

The amount of sales expressed as the total sum of money spent by consumers.

Question 5

fixed costs

Answer 5

Costs that stay the same regardless of output, e.g. rent and wages

Question 6

variable costs

Answer 6

Costs that change in relation to output, e.g. raw materials.

Question 7

total variable costs

Answer 7

Variable Cost Per Unit x Quantity

Question 8

total costs

Answer 8

Total Fixed Costs + Total Variable Costs

Question 9

total revenue

Answer 9

The total amount of money coming into a business from the sales of goods/services.

Question 10

contribution

Answer 10

The difference between total revenues and total variable costs.

Question 11

contribution per unit

Answer 11

The amount of money each unit sold contributes towards fixed costs and once break even has been achieved then contributes towards profit.

Question 12

break even point

Answer 12

The level of output at which the business is making neither a profit or loss, where total costs equal total revenue.

Question 13

margin of safety

Answer 13

The difference between the actual number of units produced and the number of units required to break even.

Actual Output - Break-even Output

Question 14

break even chart

Answer 14

A visual representation of total costs and total revenues, identifying the point at which break-even is achieved e.g. when the TC line crosses the TR line.

Question 15

break even analysis

Answer 15

A numerical technique used by a business to identify the number of unit necessary to achieve an equilibrium where total costs equal total revenues.

Question 16

budget

Answer 16

A target amount of money set by a business in a specific time period. A budget can be Expenditure, Income or Profit.

Question 17

zero based budget

Answer 17

Each department is set a budget of nothing and has to justify any requests for spending.

Question 18

historical figures

Answer 18

Past data can be used as a basis for setting future budgets.

Question 19

variance analysis

Answer 19

The process of calculating and interpreting any differences between budgeted and actual figures.

Question 20

adverse variance

Answer 20

The difference between the budgeted figure and the actual figure which negatively impacts the business, e.g. actual costs higher than budgeted costs.

Question 21

favourable variance

Answer 21

The difference between the budgeted figure and the actual figure which benefits the business, e.g. actual profits higher than budgeted profits.