Flashcards

Number of flashcards in this category: 16.

1.
customer lifetime value
value of the entire stream of purchases that a customer would make over their lifetime.

CLV = [unit contr * units purchased a year for 1 customer]* years as customer

- variable costs already accounted for; this is purely profit
2.
% premium
Also the "percent markup."

% premium = (sale price/ variable cost)-1

E.g. We're selling the product at 125% of the cost to make. We've marked up by 25%.
3.
depreciation
accounting for a large fixed cost over time.

divide total cost by the number of years it should be depreciated across.
4.
break-even volume
The number of units required to break even.

BEV = fixed costs/ unit contribution.

Useful in deciding new investments. It'll take up x units in order to break even of the fixed costs it takes to make them.
5.
market share
market share = our sales/ total market sales.

Can be in volume (# of units), or value (% of dollar sales).
6.
variable costs
Costs that vary directly with the number of units being produced.

Ex: materials, sometimes labor if by unit.
7.
% margin
The margin is 1-(var. cost/price per unit).

E.g. The variable cost of us to make one is 40% of the final selling price. Our margin is 60%. (Of the final selling price, 60% of it is our profit.)
8.
fixed cost
A cost that doesn't vary by the number of units being produced.

Ex: cost of machinery, fixed labor costs, advertising.
9.
customer acquisition costs
cost of acquiring one customer (through direct mail, samples, discounts)
10.
sunk costs
Unrecoverable past expenditures.

Ex: R&D, already spent. Shouldn't be factored into the decision, since there is no way to get it back.
11.
customer retention cost
cost of retaining one loyal customer (loyalty programs, discounts)
12.
unit contribution
actual amount you're making on one unit.

REVENUE-VARIABLE COST.
(e.g. sell for $6, cost us $4, unit cont = $2)
13.
opportunity cost
Value of the next best choice that you're giving up. Doing this "cost" me x dollars, which was the value of the next best opportunity.

DON'T include opportunity costs when assessing profitability, unless it's certain you would have gained it.
14.
cannibalization
introduction of a new product that steals market share or profit from OWN firm's existing product, rather than a competitor's
15.
retail price
What the consumer pays.
16.
profit impact
profit impact = (unit cont. * # of units sold) - fixed costs

Essentially, how much we made from selling units (after var. costs removed), minus the extra fixed costs.

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Number of flashcards in this category: 16.
1.	customer lifetime value	value of the entire stream of purchases that a customer would make over their lifetime. CLV = [unit contr * units purchased a year for 1 customer]* years as customer - variable costs already accounted for; this is purely profit
2.	% premium	Also the "percent markup." % premium = (sale price/ variable cost)-1 E.g. We're selling the product at 125% of the cost to make. We've marked up by 25%.
3.	depreciation	accounting for a large fixed cost over time. divide total cost by the number of years it should be depreciated across.
4.	break-even volume	The number of units required to break even. BEV = fixed costs/ unit contribution. Useful in deciding new investments. It'll take up x units in order to break even of the fixed costs it takes to make them.
5.	market share	market share = our sales/ total market sales. Can be in volume (# of units), or value (% of dollar sales).
6.	variable costs	Costs that vary directly with the number of units being produced. Ex: materials, sometimes labor if by unit.
7.	% margin	The margin is 1-(var. cost/price per unit). E.g. The variable cost of us to make one is 40% of the final selling price. Our margin is 60%. (Of the final selling price, 60% of it is our profit.)
8.	fixed cost	A cost that doesn't vary by the number of units being produced. Ex: cost of machinery, fixed labor costs, advertising.
9.	customer acquisition costs	cost of acquiring one customer (through direct mail, samples, discounts)
10.	sunk costs	Unrecoverable past expenditures. Ex: R&D, already spent. Shouldn't be factored into the decision, since there is no way to get it back.
11.	customer retention cost	cost of retaining one loyal customer (loyalty programs, discounts)
12.	unit contribution	actual amount you're making on one unit. REVENUE-VARIABLE COST. (e.g. sell for $6, cost us $4, unit cont = $2)
13.	opportunity cost	Value of the next best choice that you're giving up. Doing this "cost" me x dollars, which was the value of the next best opportunity. DON'T include opportunity costs when assessing profitability, unless it's certain you would have gained it.
14.	cannibalization	introduction of a new product that steals market share or profit from OWN firm's existing product, rather than a competitor's
15.	retail price	What the consumer pays.
16.	profit impact	profit impact = (unit cont. * # of units sold) - fixed costs Essentially, how much we made from selling units (after var. costs removed), minus the extra fixed costs.