Key unit 1 calculations and definitions Flashcards
Market size plus calculation
The size of market can be measured in terms of the number of items sold (volume) or the amount of spending (value).
Volume = number of items sold
OR
Value = number of items sold x average selling price
Market growth plus calculation
Measures the increase in sales (as a percentage) in a market over a given period. (New-original market size / original market size) x 100
Market share plus calculation
Measures the sales of one product or business as a percentage of the total market sales (Company sales / Total market sales) x 100
Variable cost per unit plus calculation
The variable cost of producing a single unit of production.
Total variable cost / number of output units
Total cost*
plus calculation
Assuming all costs faced by a business are either fixed or variable.
Total costs = fixed costs + variable costs
Average cost plus calculation
The average cost of producing a single unit.
Total costs / number of units produced
Total revenue plus calculation
Earnings or income generated by a firm as a result of trading activities.
Quantity sold x Average Selling Price
Profit plus calculation
The difference between total revenue and total costs.
Total Revenue – Total Costs
Contribution plus calculation
The difference between sales revenue and variable costs. It is used to pay fixed costs and then to provide profits.
Revenue – Variable Costs
Contribution per unit plus calculation
Contribution calculated for the sale of a single product.
Selling Price – Variable Cost of producing that unit
Break even plus calculation
The level of output at which a business’s sales generate just enough revenue to cover all its costs of production. At this point the business makes neither a profit nor a loss.
Fixed Costs / Contribution Per Unit
Margin of safety plus calculation
The amount by which a firm’s current level of output exceeds the level of output necessary to break-even.
Current Output – Break Even Output
Margin of safety (by value) plus calculation
The amount by which a firm’s current level of output exceeds the level of output necessary to break-even, in value terms.
(Current Output – Break Even Output) x Average Selling Price
Margin of safety (by %) plus calculation
The amount by which a firm’s current level of output exceeds the level of output necessary to break-even, in percentage terms.
(Current Output – Break Even Output)/
Break Even Output
Net monthly cash flow plus calculation
Calculated by subtracting the total outflow of cash from the inflow.
Cash Inflow – Cash Outflow
