Break Even Analysis, Desicion Making, Cash Budgets And Income Statement Flashcards
Profit =
Sales revenue-costs=profit
What is break even?
Break even is when the revenue(sales) matches the cost of the business making neither a lift nor profit
Total costs=
Fixed costs + Variable costs
Sales revenue =
Units sold x Selling price
Profit/loss=
Sales revenue - Total cost
What is break even analysis
Break even analysis is working out how many items you have to sell in order to break even
If you do not reach the break even point, you make …
A loss
If you go beyond the break even point, you make …
Profit
What are the two types of costs
Fixed costs
Variable costs
What are fixed costs
… are not influenced by the number of products you make (“output”)
Example of fixed costs
Rent
What is variable costs
… are influenced by the number of products you make
Example of variable cost
The more of a product you make, the more you will pay for the materials
Break even point=
Fixed cost
——————————————————
(Selling price per unit-variable cost per unit)
What is decision making
… is choosing one option from a range of options
What are the 3 types of decision making
Strategic
Tactical
Operational
What are strategic decision
… are long term decision that effect the overall direction of the company. They are made by managers at the heights level in the organisation
What are tactical decisions
… are medium term decision that are taken to halo achieve the strategic decision. They are made by senior and occasionally middle managers
What are operational decisions
… are short term decision that are taken on a day-to-day basis. They are made by low level managers or supervisors
Example of strategic decision
Becoming a world wide business
Example of tactical decision
Opening more stores
Example of operational decision
Who will be working during the week
What is a cash budget
… is a prediction of cash flowing in and out of the business. It does not tell a business about its profitability
What is an income statement
… are produced to tell the organisation if they have made a profit or loss
What are the two types of income statement
Trading account
Profit and loss account
