2.2 flashcards

Subdecks (4)

What is a sales forecast?
predicting future sales volume and sales revenue based on past sales data and market research
what factors affect sales forecasting
consumer trends
economic variables (interest rates, inflation)
action of competitors
what are the difficulties of sales forecasting 
accurate sales forecast are hard to make because its difficult to predict the effect on sales
how to calculate sales volume
sales revenue / selling price
how to calculate sales revenue
selling price x sales volume
what is a fixed cost
cost that does not vary with output
What is a variable cost?
a cost that varies with the level of output.
What is contribution per unit?
Selling price - variable costs per unit
What is the break-even point?
level of sales a business needs to cover its total costs
how to calculate break-even point
Fixed costs / contribution per unit
what is margin of safety
Actual output - break even output
what are the benefits of break even analysis
- quick and easy to do
- use to gain a source of finance
- decisions on whether to release new products
- forecast the amount needed to sell to cover costs
what are the disadvantages of break even analysis
- if data is inaccurate, results will be wrong
- assumes the business sells all the products
- doesn't tell how many you're actually going to sell
- is simple for a single product
- variable costs always change