unit 6.3 quizlet Flashcards
Average rate of return
Used to see if an investment is worthwhile
Investment
Buying capital equipment
Life expectancy
How long a machine or investment is likely to last for
Breakeven
The level of output where revenue is equal to total costs (given in units and must round up to the nearest whole number)
Contribution per unit
How much of revenue gained by selling each unit can be used to pay fixed costs (given in £)
Margin of Safety
How many units a business can reduce output by without making a loss (given in units)
Break even formula
fixed costs / contribution per unit
Contriubtion per unit formula
Selling price - variable cost
Margin of safety formula
Actual output - break even output
Average annual profit formula
Total profit / life expectancy
Average rate of return formula
Average annual profit / cost of investment) x 100
