Business Theme 2 Key Definitions 2.2

all of the key terms for business 2.2

Sales Forecasting

predicting of future sales and trends

Fixed Costs

Costs that do not vary with output

e.g. Salaries, Rent

Variable Costs

Costs that do vary with output

e.g. Wages

Sales Revenues

Selling price x Sales Volume

Sales Volume

Sales Revenue/Selling Price

Break Even

Break even is the point at which a business isn’t making a profit or a loss

Total Contribution

Total contribution is the difference between the total sales revenue and total variable costs

Contribution

Selling price - Variable cost per unit

Break Even Point

Total fixed costs/Contribution

Income Budgets

How much revenue a company is budgeted to make

Expenditure Budget

How much of the business’ revenue is budgeted to be spent

Profit Budget

How much revenue is budgeted to be used as profit

Historical Figures

Using previous numbers to help set budgets

Zero Budgeting

Having no set starting budget and conniving the board to give money for projects as you go

Variance

The actual outcome compared to what was budgeted

Adverse Variance

Failing to meet what was initially budgeted

Favourable Variance

When the variance is good(favourable) for the business.