Business

Average rate of return (ARR) | This is an investment appraisal technique which calculates the average annual profit of an investment project, expressed as a percentage of the sum of money invested. |

Break-even chart | This is a graph showing the total revenue and the total costs of a business at various levels of output. It is a form of Management Accounting and it enables a manager to see the expected profit or loss that a product will face at different levels of output. |

Break-even point | This refers to the point on a break-even chart where the total revenue (T.R) of a business (or product) is equal to its total costs (T.C). It can also be calculated mathematically by using the following formula : |

Budget | This is a financial plan for the forthcoming year, that is drawn up to help a business achieve its objectives. It covers aspects such as sales, production expenses, etc. |

Budgetary control | This refers to the system of regular comparison of budgeted figures (for revenue and expenses) with the actual outcomes. Any differences between the budgeted figures and the actual outcomes are known as variances - these need to be investigated and the reasons for their existence must be established.  |

Contribution | This is total revenue minus total variable costs. The remaining figure is called 'contribution' because it contributes towards covering fixed costs and, once these are covered, it contributes towards profit. |

Contribution per unit | This is the amount of money that each unit that is sold contributes towards covering the fixed costs of the business. Once the fixed costs are covered, all extra contribution is profit. |

Cost centre | This is a department or a division of a business to which certain costs can be allocated (e.g. wages and salaries, telephone bills, etc). |

Direct cost | This is a cost which can be attributed to the production of a product, and it will vary in direct proportion to output (e.g. raw materials and wages of...