7. Models for decision making Flashcards
What is breakeven point
Total cost = Total Revenue = 0 profit
What are Cos-Volume-Profit assumptions
Assume these are constants
- Selling price per unit
- Variable cost per unit
- Total fixed costs
= Perfect competition
What is the forumal for breakeven point
Fixed costs/ Unit contribution
What is the formula for contribution/salres ratio
Contribution per unit/ Selling price per unit
What is the formula for breakeven revenue
Fixed costs/ contribution sales ration x selling price per unit
What is the formula for output required for target profit
Fixed costs + target profit /. unit contribution
What is the formula for margin of safety
Budgeted sales - breakeven sales
What is the formula for margin of safety %
Budgeted sales - breakeven sales/ budgeted sales
What are the three graphs that show costs, revenue for single product
- Breakeven chart
- Contribution chart
- Profit volume chart
What is the formula for breakeven point for multiple products
Breakeven point = fixed costs/ weighted average unit contribution
What is the forumal for breakeven revenue for multiple products
Breakeven revenue = Fixed costs / weighted average C/S ratio
In product mix which product is sold first
Most profitable to least profitable
What are limitations of breakeven analysis
Assumes that
- All costs can be split into fixed and variable elemeents
- fxied costs care constant
- Variable cost per unit is constant
- selling prices are constant
- Inventory levels are costant (sales volume=production volume|)
What are technologies which improve decision making
- Artifical intelligence
- Data visualisations (Intent, perception, simplicity)
