Samarkand iktisodiyot va servis instituti

Lesson 20. Marketing activities and their characteristics.

CASH FLOW PROBLEMS

Ilova 1 (20.1)

Setting up a business: the contribution factor
Look at the four formulae below.
Contribution = sales revenue - variable costs.
Profit = Total value of contributions - total costs
or
Profit = Revenue - {variable costs + fixed costs}
Break-even volume of production = fixed costs
unit contribution
The conversation below is between a tutor and a student in a seminar on setting up in business. Complete the spaces.
Teacher: All products sold should make a contribution to the business.
Student: What is contribution?
Teacher: It is the selling price of goods sold by the company: (1).......................
....................... ; less (2) ....................... ....................... .
Student: So, it's like margin.
Teacher: Yes, it's the same as the gross profit margin. But, to calculate profit, you
have to consider (3)....................... costs. In other words, the total value
of contributions less (4)....................... and (5)....................... costs. |
Student: I see. And when you've made enough contributions, you reach your
break-even point.
Teacher: Yes, that's right. Then you start to make profit. Student: How do you
calculate the break-even point?
Teacher: You have to divide the (6).............................................. by the
(7)....................... ......................., or the contribution made by a single
item that you sell.
Student: So if you raise your price, you increase the value of the contributions.
Teacher: Yes, but you must not raise your price so much that you lose sales.
Ilova 2 (20.2)
Overheads

Here is a list of 16 fixed cost items. Categorize them according to the headings given below.

electricity account professional indemnity insurance

employer's liability insurance books, newspapers
mortgage payments rent
salaries leasing of computers
telephone car and van hire
car hire purchase agreements employee national insurance
contributions
secretarial support accountancy fees
stationery and printing equipment, machinery