Term
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Definition
is the amount remaining after the deduction of variable costs from sales.
The amount contributes towards covering the organisation's fixed costs |
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Term
| What is the formula for contribution? |
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Definition
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Term
| What is the formula for Contribution Ratio |
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Definition
=(Contribution/Sales)x 100
=(bx/sales)x100 |
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| Define the Breakeven Point |
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Definition
This is the point where total contribution is equal to total fixed costs.
it is the value of breakeven units
it is the point where profit is zero |
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Term
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Definition
y = bx-a
where:
a = fixed cost
b = contribution per unit
x = number of units sold |
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Term
| Mathematically BEU (using the linear equation) = |
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Definition
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Term
| What is the formula for BEU |
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Definition
BEU = Fixed cost/contribution per unit
x=a/b |
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Term
| Given the contribution per unit and fixed cost, how do you sold for BEU? |
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Definition
BEU is..
bx-a=0
bx=a
x=a/b
which is fixed cost/contribution per unit
therefore
remember that:
b = contribution per unit
a = fixed cost
x = quantity |
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Term
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Definition
=FC/contribution ratio
=a/b% |
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Term
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Definition
its the excess of budgeted sales over the BEV.
This is the percentage or amount by which sales can decline before losses are incurred |
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Term
| Margin of safety formula is... |
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Definition
Sales units - BEU
Sales value - BEV |
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| What is the margin of safety ratio |
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Definition
| = Margin of Safety / Sales |
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Term
| What is the Target Profit formula in sales units? |
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Definition
remember that profit is..
y = bx-a
Therefore...
bx = a+y
Therefore sales units (x)is
x = (a+y)/b or
x = (a+y)/b% |
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