what you need to know

Question 1

Total costs

Answer 1

Fixed costs + Variable costs

Question 2

Profit

Answer 2

Total revenue – Total costs
OR
Total contribution – Fixed costs

Question 3

Variable costs (Total variable costs)

Answer 3

Variable cost per unit x Number of units sold

Question 4

Total revenue (Sales revenue or Turnover)

Answer 4

Selling price per unit x Number of units sold

Question 5

Market capitalisation of a business

Answer 5

Number of issued shares x Current share price

Question 6

Expected value of a decision with two possible outcomes - A & B

Answer 6

[Pay-off of A x probability of A] + [Pay-off of B x probability of B]

Question 7

In a decision tree Net gain

Answer 7

Expected value – Initial cost of decision

Question 8

Market size (volume)

Answer 8

market size is the quantity of goods and services produced in a particular market over a period of time (usually one year).

Question 9

Market size (value)

Answer 9

is the total sales revenue generated from selling all of the goods and services produced in a particular market over a period of time (usually one year).

Question 10

Sales volume is

Answer 10

the quantity of goods and services produced by a particular business over a period of time (usually one year).

Question 11

Sales value

Answer 11

the total sales revenue of a particular business over a period of time (usually one year).

Question 12

Market growth (%) in year ‘X’

Answer 12

Change in the size of the market between year (X-1) and year X/Size of market in year (X-1) x100

Question 13

Sales growth (%) in year ‘X’

Answer 13

(sales figure in year x - sales figure in year x-1)/ sales figure in year x-1 x 100

Question 14

Market share (%)

Answer 14

Sales of one product OR brand OR business/Total sales in the market x100

Question 15

Price elasticity of demand

Answer 15

% change in quantity demanded/ % change in the price

Question 16

Price inelastic demand has a coefficient in the range

Answer 16

0 to –1.

Question 17

Price elastic demand has a coefficient in the range

Answer 17

–1 to – ∞.

Question 18

Added value (value added)

Answer 18

sales revenue- cost of production

Question 19

Labour productivity

Answer 19

output in a given time period/ number of employees

Question 20

Unit costs (average costs)

Answer 20

total costs/output

Question 21

Capacity utilisation (%)

Answer 21

actual output/maximum output x100

Question 22

Re-order quantity

Answer 22

Lead time (in days) x Average daily usage

Reorder quantity is the total number of product units you request from a manufacturer or supplier on an inventory replenishment purchase order

Question 23

Re-order level

Answer 23

Re-order quantity + Minimum inventory level

Question 24

Return on investment (%)

Answer 24

return on investment/ cost of investment x 100

Question 25

Gross Profit

Answer 25

Sales Revenue – Cost of Sales

Question 26

Operating profit

Answer 26

gross profit (Sales Revenue – Cost of Sales)– Operating Expenses

Question 27

Profit for year

Answer 27

(Operating profit + Profit from other activities)– Net finance costs – Tax

Question 28

what is a Variance

Answer 28

The difference between an actual and a budgeted figure.

Question 29

what is a favourable varience

Answer 29

when the actual outcome serves the business better then the budgeted outcome

Question 30

what is a adverse varience

Answer 30

when the actual outcome is worse of for the business then the budgeted outcome

Question 31

Contribution per unit

Answer 31

Selling price – Variable costs per unit

Question 32

Total contribution

Answer 32

Contribution per unit x Units produced/sold OR Total contribution = Total revenue minus Total variable costs

Question 33

Break-even output

Answer 33

fixed costs/ contriubution per unit x 100 Output at which total revenue covers total costs

Question 34

at what point on a break even graph does the break even level of output occur

Answer 34

where total revenue is equal to total costs

Question 35

how do you calculate the level of profit from a break even diagram

Answer 35

vertical distance between total revenue and total cost curves

Question 36

Margin of safety

Answer 36

Actual level of output – Breakeven level of output

Question 37

Gross profit margin (%)

Answer 37

gross profit/ sales revenue x 100

Question 38

Operating profit margin (%)

Answer 38

operating profit/ sales revenue x 100

Question 39

Profit for year margin (%)

Answer 39

profit for year/ sales revenue x 100

Question 40

Labour turnover (%)

Answer 40

Number of staff leaving during the year/ Average number of staff employed by the business during the year x 100

Question 41

Employee retention rate (%) for a particular time period

Answer 41

Number of employees at end of period – number of leavers / Number of employees at end of period x 100

Question 42

Employee costs as percentage of turnover

Answer 42

Employee costs/ Sales turnover x 100

Question 43

Labour cost per unit

Answer 43

Labour costs/ Units of output

Question 44

Return on capital employed (ROCE)

Answer 44

Operating profit/ Total equity plus non-current liabilities x 100

Question 45

Current ratio

Answer 45

current assets/ current liabilitys

Question 46

Gearing (%)

Answer 46

Non-current liabilities/ Total equity plus non-current liabilities x 100

Question 47

capital employed

Answer 47

total equity + non-current liabilities

Question 48

Payables days

Answer 48

Payables/ Cost of sales x 365

Question 49

Receivables days

Answer 49

Receivables/ Sales revenue x 365

Question 50

Inventory turnover

Answer 50

Cost of goods sold/ Average inventories held

Question 51

Average rate of return (%)

Answer 51

(Net return from project (£)/ number of years)/ Initial cost of project (£) x 100