Page 161 - BA2 Integrated Workbook STUDENT 2018
P. 161
Performance measurement
Financial performance measures
Company LMN has two investment centres, Division 1 and Division 2. Information
relating to the two divisions is given below:
Division 1 Division 2
$000 $000
Sales revenue 5,000 3,000
Variable production costs 2,500 800
Fixed production costs 700 500
Variable non-production costs 200 150
Fixed non-production costs 800 400
Capital employed 2,500 5,000
2.1 Gross revenue
The total sales achieved by a company is known as gross revenue. This is a useful
figure for the sales director of a company who needs to know how many customers
their products or services have reached.
However, for various reasons, not all sales are successful and companies can
experience returns from customers or goods could be lost in transit. It is important
that these deductions are made from the gross revenue figure to give another
meaningful measure called net sales revenue.
The sales revenue for divisions 1 and 2 are given as $5m for division 1 and
$3m for division 2.
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