Variable Costing and Segment Reporting

These flashcards cover key terms and concepts related to variable costing and segment reporting in managerial accounting.

Variable Costing

A costing method that includes only variable manufacturing costs (direct materials, direct labor, and variable overhead) in product costs.

Absorption Costing

A costing method that includes all production costs, both variable and fixed, in the determination of unit product cost.

Contribution Margin

Sales revenue minus variable costs; it measures the profitability of individual products.

Traceable Fixed Costs

Costs that can be directly traced to a specific segment and would disappear if that segment were eliminated.

Common Fixed Costs

Costs that benefit the entire organization and would not disappear if a specific segment were eliminated.

Segment Margin

The contribution margin of a segment minus its traceable fixed costs; the best measure of a segment's long-run profitability.

Break-even Point

The level of sales at which total revenues equal total costs, resulting in neither profit nor loss.

Cost-Volume-Profit (CVP) Analysis

A method that analyzes how changes in costs and volume affect a company's operating income and net income.

Fixed Manufacturing Overhead

The costs of production that do not change with the level of output, typically allocated to products under absorption costing.

Contribution Format Income Statement

An income statement that separates variable costs from fixed costs to highlight the contribution margin.