Formulas

Question 1

Formula for Total costs

Answer 1

Fixed costs + Variable costs

Question 2

Formula for Profit

Answer 2

Total revenue - Total costs OR Total contribution - Fixed costs

Question 3

Formula for Total variable costs

Answer 3

Variable cost per unit × Number of units sold

Question 4

Formula for Total Revenue/Sales revenue /Turnover

Answer 4

Selling price per unit × Number of units sold

Question 5

Formula for Market capitalisation of a business

Answer 5

Number of issued shares × Current share price

Question 6

Formula for Expected value of a decision
with two possible outcomes
(A & B)

Answer 6

(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 7

Formula for Net gain (decision tree )

Answer 7

Expected value - Initial cost of decision

Question 8

Formula for Market size volume

Answer 8

The quantity of goods and services produced in a particular market over a period of time usually one year.

Question 9

Formula for Market size value

Answer 9

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 10

Formula for Sales volume

Answer 10

The quantity of goods and services produced by a particular business over a period of time usually one year.

Question 11

Formula for Sales value

Answer 11

The total sales revenue of a particular business over a period of time usually one year.

Question 12

Formula for Market growth % in year’ X

Answer 12

(Change in the size of the market between year X-1 and year X) x 100 / Size of the market in year (X-1)

/ = divide

Question 13

Formula for Sales growth % in year’ X

Answer 13

(Change in sales of product or business between year X-1 and year X) x 100 / Sales of product or business in year (X-1)

/ = divide

Question 14

Formula for Market share %

Answer 14

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

/ = divide

Question 15

Formula for Price elasticity of demand

Answer 15

Percentage change in quantity demand /
Percentage change price
Price inelastic demand has a coefficient in the range 0 to-1. Price elastic demand has a coefficient in the range-1 to-∞.

Question 16

Formula for Added value

Answer 16

Sales revenue - costs of bought in goods and services.

Question 17

Formula for Labour productivity

Answer 17

Output per time period /
Number of employees

Question 18

Formula for Unit costs/average costs

Answer 18

Total costs of production /
Number of units of output produced

Question 19

Formula for Capacity utilisation %

Answer 19

Actual output in a given time period x 100 / Maximum possible output in a given time period

Question 20

Formula for Return on investment %

Answer 20

Return on investment (£) x100 /
Cost of the investment (£)

Question 21

Formula for Gross Profit

Answer 21

Sales Revenue - Cost of Sales

Question 22

Formula for Profit from Operations/Operating profit

Answer 22

Sales Revenue - Cost of Sales-Operating Expenses

Question 23

Formula for Profit for year

Answer 23

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

Question 24

Formula for Variance

Answer 24

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 25

Formula for Contribution per unit

Answer 25

Selling price - Variable costs per unit

Question 26

Formula for Total contribution

2 formulas

Answer 26

Contribution per unit × Units produced or sold
OR
Total revenue - Total variable costs

Question 27

Formula for Break-even output

Answer 27

Fixed costs / Contribution per unit (selling price - variable cost per unit)

On a break-even chart the break-even output is the level of output at which Total Revenue equals Total Costs. On a break-even chart the level of profit at a given level of output is the vertical distance between the Total Revenue line and the Total Cost line.

Question 28

Formula for Margin of safety

Answer 28

Actual level of output - Breakeven level of output

Question 29

Formula for Gross profit margin %

Answer 29

gross profit x 100 / Sales revenue

Question 30

Formula for Operating profit margin %

Answer 30

operating profit x 100 / Sales revenue

Question 31

Profit for year margin %

Answer 31

Profit for year x100 /
Sales revenue

Question 32

Formula for Labour turnover %

Answer 32

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

Question 33

Formula for Employee retention rate % for a particular time period

Answer 33

(Number of employees at end of period - number of leavers) x100 / Number of employees at end of period

Question 34

Formula for Employee costs as percentage of turnover

Answer 34

Employee costs x100 / Sales turnover

Question 35

Formula for labour cost per unit

Answer 35

Labour costs / Units of output

Question 36

Formula for Return on capital employed ROCE %

Answer 36

Operating profit x100 / (Total equity plus non-current liabilities)
Total equity plus non-current liabilities = capital employed

Question 37

Formula for Current ratio

Answer 37

Current assets /
Current liabilities

Question 38

Formula for Gearing %

Answer 38

Non-current liabilities x100 /
(Total equity plus non-current liabilities)
total equity plus non-current liabilities = capital employed

Question 39

Formula for Payables days

Answer 39

Payables x365 /
Cost of sales

Question 40

Formula for Receivables days

Answer 40

Receivables x365 /
Sales revenue

Question 41

Formula for Inventory turnover

Answer 41

Cost of goods sold /
Average inventories held

Question 42

Formula for Average rate of return %

Answer 42

(Net return from project £ / number of years) /
Initial cost of project £
Net return from project = Total income from project over its lifetime - Total costs of project over its lifetime, including the initial cost of the project.