Finance Flashcards
What are fixed costs?
Costs that do not vary with the level of output
What are overheads/indirect costs?
Costs that can not be attributed to a particular unit of output
What are direct costs?
Costs that are directly attributable to a unit of output
What are variable costs?
Costs that change in proportion to the level of good or services a business produces
How can total costs be calculated?
Fixed costs + variable costs
What is marginal cost?
The cost of producing one extra unit
What is unit cost?
Cost of producing one unit
Total costs ÷ output
What are the different types of costing method?
Standard costing Cost centres Profit centres Absorption costing Contribution or marginal costing
What is contribution?
Revenue - variable costs
What is contribution per unit?
Price - Variable costs per unit
What is profit in relation to contribution?
Total contribution - fixed costs
What are the three ways to find the break even level?
Using a chart
Calculating
Using a graph
How can you calculate break even?
Break even = Fixed costs ÷ contribution per unit
What is break even?
The point when total revenue = total costs , this is when all costs have been covered
What is total revenue?
Price x sales/output
What is the margin of safety?
The difference between the actual level of output and the break even level
(This will be a number of units not a monetary value)
Calculating ARR (average/accounting/annual rate of return)
1) find total cash inflows
2) subtract cost of investment from total inflows
3) work out average annual profit
4) work out the return on investment as a percentage
(Average annual profit ÷ cost of investment)
What is gross profit?
Revenue - cost of sales
What is operating profit?
Gross profit - expenses
What are the cost of sales?
The direct costs of producing the good
What is profit for the year also known as?
Retained profit
Calculated by net profit - tax and dividends
What is an asset?
What a business owns
What is a liability?
What the business owes
What is liquidity?
The ability to convert assets into cash
What are the three types of current asset?
Cash (cash in hand, cash in bank)
Debtors
Stock
The types of stock
Raw materials
Unfinished goods
Finished goods
Calculate working capital
Current assets - current liabilities
Calculating standard deviation
1) find mean value of results
2) record deviation (variance) of each result from mean
3) square all deviations to ensure positive
4) find sum of squared deviations and ÷ by number of units of data
5) square root the answer and you have your standard deviation
