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Avoidable Cost
A cost that could be eliminated in whole or in part if a different course of action is taken that would either end the need for the activity or increase efficiency
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Differential Cost
A cost that differs between alternatives, also known as incremental cost or relevant cost.
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Imputed Cost
A relevant cost in decision making but one for which information might not be available.
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Absorption Costing (full costing)
A type of product costing that assigns fixed overhead units produced as a product cost
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Contribution margin rate
A ratio of contribution margin to price computed as (P-VC), where p is price and vc is variable cost
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Margin of safety
The excess of actual or budgeted sales over sales at the breakeven point. It is the amount by which sales could decrease before losses occur
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Variable costing
A type of product costing that assigns fixed overhead units produced as a product cost
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Cost-volume-Profit analysis
Sometimes called breakeven analysis, key factors are revenues, fixed costs, and variable costs
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Contribution margin per unit
Sales price less variable cost per unit
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Breakeven point in units
Total fixed costs divided by price less variable costs per unit
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Breakeven point in sales dollars
Total fixed costs divided by (price less variable costs divided by price)
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Determining the number of units to generate a profit
Total fixed costs plus net income before taxes divided by price less variable costs
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