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Fixed Costs
Costs that do not change with production volume.
Variable Costs
Costs that vary directly with production volume.
Contribution Margin
Sales revenue minus variable costs.
Break-even Point
Sales level where total revenue equals total costs.
Cost Object
Item or activity for which costs are measured.
Cost Driver
Factor that causes a change in cost.
Net Income
Total revenue minus total expenses.
Gross Margin
Sales revenue minus cost of goods sold.
Fringe Benefits
Additional compensation provided to employees.
Selling Price
Amount charged to customers for a product.
Cost per Unit
Total cost divided by number of units produced.
Fixed Cost per Unit
Fixed costs divided by production volume.
Sales Revenue
Income from sales of goods or services.
Sales Commissions
Payments to salespeople based on sales performance.
Total Fixed Costs
Sum of all fixed costs incurred by a company.
Variable Cost per Unit
Variable costs divided by number of units produced.
Production Volume
Total number of units produced in a period.
Indirect Cost
Cost not directly tied to a specific product.
Direct Labor Hours
Hours worked directly on production of goods.
Machine Hours
Time machines are used in production processes.
Allocation Base
Basis used to allocate indirect costs to cost objects.
Cost Allocation
Process of assigning indirect costs to cost objects.
Cost Driver
Factor influencing cost allocation to cost objects.
Relevant Costs
Costs that differ among alternatives in decision-making.
Sunk Cost
Past costs that cannot be recovered.
Master Budget
Comprehensive budget covering all departments' budgets.
Participative Budgeting
Budgeting involving input from all management levels.
Operating Budget
Budget covering day-to-day operational expenses.
Capital Budgeting
Financial planning for long-term investments.
Strategic Budgeting
Long-term budgeting for business scope and products.
Indirect Costs
Costs not directly traceable to a cost object.
Unit-Level Costs
Costs incurred for each unit produced.
Facility-Level Costs
Costs associated with overall facility operations.
Special Order Costs
Costs incurred when accepting special orders.
Opportunity Cost
Cost of the next best alternative foregone.
Job Offer Analysis
Comparison of relevant costs between job offers.
Budgeting Techniques
Methods used for creating financial plans.
Budgetary Targets
Goals set for financial performance in budgeting.
Decision-Making Costs
Costs considered when making business decisions.
Financial Planning Activities
Processes for managing future financial resources.
Cost Information Availability
Access to data needed for cost allocation.
Cause-and-Effect Relationship
Link between a cost and its driver.
Static budget
Budget based on fixed estimates for a period.
Perpetual budgeting
Continuous budgeting process for ongoing operations.
Participative budget
Budget created with input from all levels.
Top-down budget
Budget set by upper management without lower input.
Causation Concept
Evaluates managers based on controllable revenues or costs.
Controllability Concept
Managers evaluated only on aspects they can control.
Cost center
Manager responsible for costs, not revenues.
Profit center
Manager responsible for both revenues and costs.
Flexible budget
Adjusts costs based on actual activity levels.
Static budget variance
Difference between static budget and actual results.
Volume variance
Difference between planned and actual volume.
Favorable variance
Occurs when actual costs are less than standard.
Sales budget
Forecast of expected sales by product line.
Planning budget
Initial budget based on expected activity levels.
Employee salaries and wages
Fixed cost element in budgeting for services.
Revenue estimation
Forecast of income based on sales volume.
Fixed costs
Costs that do not change with activity level.
Variable costs
Costs that vary with production volume.
Budgeting period
Time frame for which a budget is prepared.
Variance analysis
Process of comparing budgeted to actual performance.
Activity levels
Measure of output used for budgeting.
Budgeting phases
Short term, intermediate term, and long term planning.
