Accounting+-+Finance+and+Accounts

Accounting+-+Finance+and+Accounts - Finance and Accounts...

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Finance and Accounts
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Finance and Accounts
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Key Terms
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Costs Fixed (Indirect/Overheads) – are not influenced by the amount produced but can change in the long run e.g., insurance costs, administration, rent, some types of labour costs (salaries), some types of energy costs, equipment and machinery, buildings, advertising and promotion costs Variable (Direct) – vary directly with the amount produced, e.g., raw material costs, some direct labour costs, some direct energy costs Semi-fixed – where costs not directly attributable to either of the above, for example, some types of energy and labour costs
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Costs Total Costs (TC) = Fixed Costs (FC)+ Variable Costs (VC) Average Costs = TC/Output (Q) AC (unit costs) show the amount it costs to produce one unit of output on average Marginal Costs (MC) – the cost of producing one extra or one fewer units of production – MC = TC n – TC n-1
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Revenue Total Revenue – also known as turnover, sales revenue or ‘sales’ = Price x Quantity Sold TR = P x Q Price – may be a variety of different prices for different products in the portfolio Quantity – could be global sales
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Profit Profit (Π) = TR – TC Normal Profit – the minimum amount required to keep a business in a particular line of production Abnormal/Supernormal Profit – the amount over and above the amount needed to keep a business in its current line of production
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Break Even
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Break Even Occurs where Total Costs = Total Revenue Start-up costs – fixed costs Running costs – variable costs Revenue stream depends on price charged ‘Low’ price – need to sell more to break-even ‘High’ price – lower level of sales required before breaking even Fixed Costs Break-Even Point = --------------- Contribution
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Purpose of Accounts
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This note was uploaded on 07/29/2010 for the course ACCOUNTS 2332 taught by Professor Piyush during the Fall '10 term at Amity University.

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Accounting+-+Finance+and+Accounts - Finance and Accounts...

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