Budgeting, Break Even And Cash Flow Forecasts Flashcards
Budgets definition
Planned levels of income and expenditure of a business or part of a business
Variances definition
The differences between budgeted and actual figures
They can be favourable or adverse
Favourable variance
The profits is higher than expected. Revenue is higher than budgeted/costs are lower 5an expected
Adverse variance definition
Profits of a business is lower than budgeted
Revenue is lower than budgeted or costs are higher than expected
Contribution per unit definition
The amount each unit sold contributed to the fixed costs of a business
Total contribution formula
Contribution per unit x number of units sold
Break even point
The level of sales where revenue is equal to total costs
Fixed costs / Contribution per unit
Receivables definition
Amounts owed by customers for goods that have been sold on credit
Payables definition
Amount owed to suppliers for goods bought on credit
Break even point formula
Fixed costs / contribution per unit
