How do you determine the fixed portion of overhead cost? I suggest that the first step in determining the fixed portion of a mixed cost (a cost that is partially fixed and partially variable) is to graph the data. Label...
How do you determine the fixed portion of overhead cost? I suggest that the first step in determining the fixed portion of a mixed cost (a cost that is partially fixed and partially variable) is to graph the data. Label...
A company’s total contribution margin in dollars is the total net sales minus the total amount of variable expenses. Dividing the contribution margin in dollars by the total amount of net sales is the contribution...
of visits). When the number of visits exceeds the upper limit of a range, the monthly cost jumps to a higher level and remains fixed until the visits exceed the new upper limit. A stepped cost is also referred to as a...
of a company’s break-even point, its expenses are sorted into fixed expenses, variable expenses, and semivariable or mixed expenses. Examples of Causes for an Increase in a Break-even Point Some of the reasons why a...
See Explanation of Standard Costing.
See job order costing.
See activity-based costing.
See Explanation of Standard Costing.
See Explanation of Standard Costing.
See Explanation of Standard Costing.
Our Explanation of Break-even Point illustrates how to determine the number of units or sales dollars that will result in zero net income. The techniques rely on a product's contribution margin or contribution margin...
+ variable expenses (cartons, helpers, etc.) of $150,000 (50,000 items X $3 each) = total static budget of $500,000. Unlike the static budget, a flexible budget for the shipping department will increase when more than...
See direct labor efficiency variance and variable manufacturing overhead efficiency variance.
Selling price per unit minus variable costs per unit, or revenues per unit minus expenses per unit.
The benefit foregone by choosing another course of action. Also known as the opportunity cost. The lost opportunity is sometimes measured by the lost contribution margin (sales minus the related variable costs).
Sometimes referred to in the context of cost or expense behavior such as “variable expenses increase as volume increases.” In this context volume might be an activity such as the number of machine hours, the...
A situation where there is correlation between the independent variables used in explaining the change in a dependent variable. When this condition exists, you cannot have confidence in the individual coefficients of the...
Regression analysis with only one independent variable.
A statistical tool used to determine the coefficients of the two or more independent variables involved in estimating the amount of the dependent variable. It utilizes the least-squares method for determining the...
Within a reasonable range of activity, the slope of the cost line is the variable rate, which is often denoted as ‘b’ in the straight line y = a + bx.
The result of subtracting all variable expenses from revenues. It indicates the amount available from sales to cover the fixed expenses and profit.
This ratio indicates the percentage of each sales dollar that is available to cover a company’s fixed expenses and profit. The ratio is calculated by dividing the contribution margin (sales minus all variable...
A statistical tool that uses the least-squares method to estimate the fixed and variable components of mixed costs.
How do you calculate opportunity costs? Definition of Opportunity Costs Opportunity costs are the profits a company (or person) missed, or the contribution margin that was missed. Opportunity cost might be thought of as...
A term used with standard costs to report a difference between actual costs and standard costs. To learn more, see Explanation of Standard Costing.
In activity-based costing this refers to the allocation of the cost of activities (determined by stage 1 allocations) to the cost objects such as products or services.
The cost transferred from one department to the next department in a process costing system.
See direct materials usage variance. To learn more, see Explanation of Standard Costing.
This is a record on an individual job (product, batch) within the job costing system. For items in process this is a subsidiary record to the general ledger account inventory: work-in-process (WIP).
Manufacturing overhead assigned to units of output. Often this is applied via a standard overhead rate. See the Explanation of Standard Costing.
In activity-based costing, this refers to the number of items that will be produced after a machine has been setup.
In standard costing the difference between the actual cost and the standard cost of direct materials or direct labor. The price variance of direct labor is usually referred to as the labor rate variance.
A phrase used in standard costing. The production that is acceptable (not rejected products) and which is assigned manufacturing costs of direct materials, direct labor, and manufacturing overhead.
Using the information generated in activity-based costing to plan and control activities and processes.
An income statement that subtracts all variable costs and expenses from revenues in order to show the contribution margin. From that is subtracted the fixed costs and expenses to arrive at net income. To learn more, see...
Costs that have both a fixed and variable component. For example, the cost of operating an automobile includes some fixed costs that do not change with the number of miles driven (e.g., operating license, insurance,...
Featured Review
"AccountingCoach PRO landed me a job I had been praying for. I have a background in Banking & Finance with basic accounting. However, over the years while working in the bank, I majored in customer service and branch management. When I left the bank, I was out of job for about a year but volunteering in an NGO. I sought a job as a Finance Officer in another NGO (where I am presently working) but I needed to brush up on my accounting skills. AccountingCoach PRO helped me get back on track and I landed the job! And with a lifetime membership, what more could I ask for?" - Marge E.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: