Test 1 Ch 2

Question 1

Major sections of a business plan

Answer 1

Description
Marketing
Operations
Financial

Question 2

variable costs

Answer 2

cost that changes in direct proportion to the change in volume

Question 3

fixed costs

Answer 3

cost that is not affected by the change in volume

Question 4

contribution margin

Answer 4

represents that amount of sales revenue left over after variable costs have been taken out

Question 5

How do fixed costs and variable costs per unit vary as the number of units sold increase or decrease?

Answer 5

variable costs remain the same per unit

fixed costs will fluctuate per unit

Question 6

How do fixed costs and variable costs in total vary as the number of units sold increase or decrease?

Answer 6

variable will change in total

fixed cost remains the same

Question 7

breakeven

Answer 7

The volume of units that need to be sold in order for the business to earn a contribution that equals its fixed costs so that neither a profit to loss is made

Question 8

target profit

Answer 8

calculations to a desired profit

Question 9

profit formula

Answer 9

SP(x)-VC(x)-FC

Question 10

What are the five major budgets included in most business plans.

Answer 10

1. Sales/cash collections
2. purchases
3. selling & administrative expense
4. cash
5. pro forma budgeted income statement

Question 11

Why is depreciation considered a non-cash expense?

Answer 11

while depreciating there is no real outflow cash expense