Formulas Flashcards
Revenue
average price x quantity sold
Income earned from selling products. Sometimes called sales, sales revenue or turnover.
Total Costs
Variable Costs + Fixed Costs
The amount of money spent by a firm on producing a given level of output.
Profit
Total Revenue - Total Costs
Contribution per unit
selling price per unit - variable costs per unit
Contribution
sales revenue - total variable costs
Total contribution
contribution per unit × no. of units sold
Breakeven output
fixed costs / Contribution per uni
Margin of safety
Actual output - breakeven output
Target profit output
fixed cost + target profit / Contribution per unit
Cash inflows
Cash income from sales + other sources of cash
Cash outflows
Raw materials + wages +rent + other items
Net cash flow
cash inflows - cash outflows
Opening balance
firms cash holding at the beginning of the time period being studied.
Closing balance
Opening cash balance + net cash flow
Percentage change
Difference / Original x 100
Fixed costs
Expenses of production that do not change with output e.g. rent. They are almost always indirect costs and are sometimes called overheads.
Costs
The expenses involved in making a product. Firms incur expenses by trading.
Variable costs
Expenses of production that do change with output e.g. components and raw materials. They are almost always direct costs.
Average costs
total costs / output
Average variable costs
The cost of making one item ignoring fixed costs and is found by dividing variable cost by the level of output.
Market size
Total sales of all the firms in a given market. The value is found by multiplying the number of units sold by price
Market share
Measures the sales of one business as a percentage of total sales in the market. sales of firm A / total market size x 100
Market growth
The change in the size of a market over time. Found by dividing the change in the size of the market by the old market size. (new market size - old market size) / old market size x 100
Added value
selling price - cost of inputs
