Calculations / Formulae

Question 1

How do you find contribution per unit?

Answer 1

Selling price - Variable costs

Question 2

Price elasticity formula?

Answer 2

Change in demand / Change in price

Question 3

Income elasticity formula?

Answer 3

Change in demand / Change in income

Question 4

Revenue formula?

Answer 4

Selling price x units sold

Question 5

Profit formula?

Answer 5

Total revenue - Total costs
OR
Total contribution - Fixed costs

Question 6

Total costs formula?

Answer 6

Total variable costs + Fixed costs

Question 7

What’s another name for fixed costs?

Answer 7

Overheads

Question 8

Total contribution per unit formula?

Answer 8

Contribution per unit x units sold
OR
Total revenue minus Total variable costs

Question 9

Market capitalisation

Answer 9

Current market share price x Number shares issued

Question 10

Expected values (decision tree)

Answer 10

Expected value of a decision with two possible outcomes - A & B =
[Pay-off of A × probability of A] + [Pay-off of B × probability of B]
N.B. Probability of A + Probability of B = 1.0

Question 11

Net gain

Answer 11

Expected value - Initial cost of decision

Question 12

Sales value

Answer 12

Selling price x quantity sold (also known as Revenue or turnover)

Question 13

Market size

Answer 13

Market size by volume is the quantity of goods and services produced in a particular market over a period of time usually one year. Market size value is the total sales revenue generated from selling all of the goods and services produced in a particular market over a period of time usually one year.

Question 14

Market growth

Answer 14

Change in the size of the market/original size of the market x 100

Question 15

Sales growth

Answer 15

change in sales/original amount sold

x 100

Question 16

Market share

Answer 16

Sales of one product OR brand OR business/Total sales in the ×100 market

Question 17

Labour productivity

Answer 17

Output per time period/Number of employees

Question 18

Unit costs

Answer 18

Total costs of production/Number of units of output produced

Question 19

Capacity utilisation

Answer 19

Actual output in a given time period/Maximum possible output in a x100 given time period

Question 20

Lead time

Answer 20

Time between placing an order and the order arriving

Question 21

Return on investment

Answer 21

Return on investment (£)/Cost

of the investment (£) ×100

Question 22

Gross Profit

Answer 22

Sales Revenue - Cost of Sales

Question 23

Operating profit

Answer 23

Sales Revenue - Cost of Sales - Operating Expenses

Question 24

Profit for the year

Answer 24

Operating profit + Profit from other activities - Net finance costs -Tax

Question 25

Net cash flow

Answer 25

cash inflow – cash outflow

Question 26

Break-even output

Answer 26

Fixed costs/Contribution per unit

Question 27

Margin of safety

Answer 27

Actual level of output - Breakeven level of output

Question 28

Budget variance

Answer 28

The difference between an actual and a budgeted figure. Favourable variance results in profits being higher than forecast. Adverse variance results in profits being lower than forecast.

Question 29

Gross profit margin, operating profit margin, profit for the year margin:

Answer 29

Take the appropriate profit figure, divide by sales revenue and multiply by 100

Question 30

Labour turnover

Answer 30

Number of staff leaving during the year/Average number of staff employed by the business during the year x100

Question 31

Labour productivity

Answer 31

Output per time period/Number of employees

Question 32

Labour costs as a % of turnover

Answer 32

Labour costs/Sales turnover x 100

Question 33

Labour cost per unit

Answer 33

Labour costs/Units of output