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A measure of activity that is related to changes in cost and is used in the denominator in calculating the predetermined factory overhead rate to assign factory overhead costs to cost objects. |
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The level of business operations at which revenues and expired costs are equal. |
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Sales less variable cost of goods sold and variable selling and administrative expenses. |
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Contribution margin ratio |
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The percentage of each sales dollar that is available to cover the fixed costs and provide income from operations. |
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Cost behavior The manner in which a cost changes in relation to its activity base (driver). |
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Cost-volume-profit analysis |
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Definition
The systematic examination of the relationships among costs, expenses, sales, and operating profit or loss. |
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A chart used to assist management in understanding the relationships among costs, expenses, sales, and operating profit or loss. |
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Costs that tend to remain the same in amount, regardless of variations in the level of activity. |
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A technique that uses the highest and lowest total cost as a basis for estimating the variable cost per unit and the fixed cost component of a mixed cost. |
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The difference between current sales revenue and the sales at the break even point. |
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A cost with both variable and fixed characteristics. |
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A measure of the relative mix of a business’s variable costs and fixed costs, computed as contribution margin divided by income from operations. |
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A chart used to assist management in understanding the relationship between profit and volume. |
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The range of activity over which changes in cost are of interest to management. |
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The relative distribution of sales among the various products available for sale. |
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The dollars available from each unit of sales to cover fixed costs and provide income from operations. |
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A method of reporting variable and fixed costs that includes only the variable manufacturing costs in the cost of the product. |
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Definition
Costs that vary in total dollar amount as the level of activity changes. |
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