2.1.2 business theme 2 financial planning

sales forecasting?

The process of predicting future sales volumes and values

factors affecting sales forcasting?

consumer trends

economic variables

actions of competitiors

sales revenue?

The total amount  of money coming into a business from the sales of a good or service 

profit?

the surplus money made by a business when revenue exceeds costs

sales volume?

the quantity of goods or services that have been sold by a business 

fixed costs?

Costs to a business that stay the same regardless of output 

variable costs?

Costs to a business that change in relation to output 

contribution?

The amount of money each unit sold contributes towards fixed costs and once break-even has been achieved then contributes to profit 

break even point?

The level of output at which the business is making neither a profit nor a loss, the point at which total costs = total revenue (TC=TR)​ 

break even point formula?

Fixed costs 

Contribution per unit 

margin of safety?

The positive difference between the actual number of units produced and the number required to break-even 

margin of safety formula?

Actual output – Breakeven output 

budget?

A target amount of money set by a business in a specific period of tim

types of budget?

expenditure

income

profit

historical budget?

Past data can be used as a basis for setting future budgets 

zero based budget?

Each department is set a budget of nothing and then has to justify any requests for spending 

adverse varience?

the difference between the budgeted figure and the actual figure is bad for the business 

  

favourable varience?

the difference between the budgeted figure and the actual figure is good for the business 

reasons for budgets?

-planning and monitoring

-control

difficulties of budgets?

-they need to be realistic as to not effect motivation

-needs good data to develop it

-time consuming