What Are the Major Line Items in the Operating Budget

question 6

Essay

What are the major line items in the operating budget of a development project, and why does it usually make sense for such a budget to consider only a single year's operation of the building?

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Definitions:

Contribution Margin

Contribution margin represents the amount by which sales revenue exceeds variable costs, indicating how much revenue is contributing to covering fixed costs and generating profit.

Net Income

The net income of a business following the deduction of all taxes and expenses from its overall revenue.

Degree of Operating Leverage

A financial ratio that measures the sensitivity of a company's operating income to its sales volume, indicating how a change in sales will affect profits.

Net Income

The total profit of a company after all expenses, including taxes and operating costs, have been subtracted from total revenue.