Term 2

Question 1

Break Even analysis

Answer 1

Used to determine the level of sales needed to cover the total cost of production.
Sales above this line means profit and below indicates a loss.

It is used as a planning tool is important because it determines the level of sales needed to obtain a profit.

Quantity (Q) = Total fixed costs / Unit price - Variable costs per unit

Question 2

Total Cost (TC)

Answer 2

The sum of the fixed and variable costs of those units.

Question 3

Fixed costs

Answer 3

Fixed costs do not change with sales…

rent, insurance, salaries of management, office staff and interest loans.

Question 4

Variable costs

Answer 4

Variable costs increase or decrease with sales.

Direct labour and materials, commissions on sales, delivery, freight and packaging.

Question 5

What is fraud

Answer 5

A wide range of activities that lead a business or person to gaining a financial advantage.

Question 6

Non-disclosure or distortion of financial information

Answer 6

A range of activities that circle around manipulating financial information used to calculate tax or other liabilities.

• Tax evasion - failing to declare income

Question 7

Business closure or restructure

Answer 7

When a business closes due to losses or a change in ownership, or when the business decides to restructure in order to return profitability.

Businesses must follow ethical and legal practices so that they do not break employment laws and anti-discrimination and bullying legislation.