Formulas

Question 1

Variable costs (total variable costs)

Answer 1

Variable costs per unit x number of units sold

Question 2

Total costs

Answer 2

Fixed costs + variable costs

Question 3

Profit

Answer 3

Total revenues - total costs OR
Total contribution - fixed costs

Question 4

Market capitalisation of a business

Answer 4

Number of issued shares x current share price

Question 5

Expected value of a decision with two possible outcomes eg.(A&B)

Answer 5

(Pay-off A x probability of A) +
(Pay-off of B x probability of B)

Question 6

net gain

Answer 6

Expected value - initial cost of decision

Question 7

Market growth (%)

Answer 7

Change in the size of the market over a period / original size of the market x 100

Question 8

Market share (%)

Answer 8

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

Question 9

Added value

Answer 9

Sales revenue - costs of bought-in goods and services

Question 10

Labour productivity

Answer 10

Output over a time period/ number of employees

Question 11

Unit costs (average costs)

Answer 11

Total costs/ number of units of output

Question 12

Capacity utilisation (%)

Answer 12

Actual output/ maximum possible output x 100

Question 13

Return on investment (%)

Answer 13

Profit from the investment (£) /
Cost of the investment (£) x 100

Question 14

Gross profit

Answer 14

Revenue - cost of sales

Question 15

Profit from operations/operating profit

Answer 15

Gross profit - operating expenses

Question 16

Gross profit margin (%)

Answer 16

Gross profit/revenue x100

Question 17

Profit from operations margin
(Operating profit margin(%))

Answer 17

Operating profit/ revenue x100

Question 18

Profit for year margin (%)

Answer 18

Profit for year/revenue x100

Question 19

Variance

Answer 19

Budgeted figure - actual figure

Question 20

Contribution per unit

Answer 20

Selling price - variance costs per unit

Question 21

Total contribution

Answer 21

Contribution per unit x units sold
OR
Total revenue - total variable costs

Question 22

Break-even output

Answer 22

Fixed costs/ contribution per unit

Question 23

Labour turnover (%)

Answer 23

Number of stuff leaving/number of staff employed by the business x100

Question 24

Margin of safety

Answer 24

Actual level of output - break-even level of output

Question 25

Employee retention rate (%) for a particular time period

Answer 25

Number of employees who remained with the business for the whole period of time/ number of employees at the start of the time period x100

Question 26

Employee costs as percentage of turnover

Answer 26

Employee costs/turnover x100

Question 27

Labour cost per unit

Answer 27

Labour costs/ units of output

Question 28

Return on capital employed (ROCE) (%)

Answer 28

Operating profit/total equity + non-current liberties x100

Where total equity + non-current liabilities = capital employed

Question 29

Current ratio

Answer 29

Current assets/Current liabilities

Question 30

Gearing (%)

Answer 30

Non-current liabilities/total equity + non-current liabilities x100

Where total equity + non-current liabilities= capital employed

Question 31

Payables day

Answer 31

Payables / cost of sales x 365

Question 32

Receivables days

Answer 32

Receivables/revenue x365

Question 33

Inventory turnover

Answer 33

Cost of sales/average inventories held

Question 34

Average rate of return (%)

Answer 34

Average annual return (£)/initial cost of project (£) x100

Question 35

Capacity utilisation

Answer 35

(Current output / maximum possible output) x100

Question 36

Revenue (sales or turnover)

Answer 36

Selling price per unit x number of units sold