Edexcel A Level Business - Theme 2.2

revenue formula

price x quantity

what is a fixed cost

cost that does not vary with output

e.g rent, salary

what is a variable cost

costs that do change with the level of output

e.g raw materials, wages

Total variable cost formula

average variable cost x quantity

what is break even

when total revenue and total cost are equal

contribution formula

selling price - variable cost

break even formula

fixed cost / contribution

what is margin of safety

the amount of loss a business can make before a loss

margin of safety formula

actual sales - break even sales

what is a budget

estimate income or expenditure for a et period of time

types of budgets

historical budget - based on past sales data

zero based - budget based on potential performance

what does favourable variance mean

underspending in the department

what does adverse variance mean

overspent in department