Financial Planning (Edexcel A-Level Business): Flashcards
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Contribution definition
Contribution definition
Sales revenue minus variable costs
Unit contribution formula
Unit contribution formula
Selling price - Variable cost per unit
Profit formula using contribution
Profit formula using contribution
Total contribution - Fixed costs
Break-even point definition
Break-even point definition
When total revenue equals total costs (no profit or loss)
Break-even output formula
Break-even output formula
Fixed costs ÷ Contribution per unit
Break-even point on chart location
Break-even point on chart location
Where total cost and total revenue lines intersect
Margin of safety definition
Margin of safety definition
How far current output exceeds break-even level
Margin of safety formula
Margin of safety formula
Current output - Break-even output
Large margin of safety benefit
Large margin of safety benefit
Provides safety cushion against market changes
Output equals sales assumption limitation
Output equals sales assumption limitation
Assumes all output is sold immediately (no stock held)