2.2 flashcards

• 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