break-even pointThe level of activity where revenues equal total expenses, producing a zero net income; also the point where the contribution margin is said to cover fixed costs
committed fixed costCosts that arise from an organization's commitment to engage in operations; unavoidable elements like depreciation, rent, insurance, property taxes
contribution marginRevenues minus all variable expenses, whether related to production or selling and administration (not to be confused with gross profit)
cost-volume-profit analysis(CVP) Analysis focusing on the interplay of pricing, volume, variable and fixed costs, and product mix
discretionary fixed costFixed cost resulting from yearly spending decisions; proper planning can result in avoidance of these costs as necessary (e.g., advertising and training)
fixed costA total cost that is the same regardless of volume; total cost is constant and per unit cost decreases with volume increases
high-low methodA simple means for separating costs into fixed and variable components, based upon the difference between costs at the highest and lowest observed levels of activity
method of least squaresA complex means for separating costs into fixed and variable components, based upon minimizing the variances between all observations and the resulting assumed cost function
mixed costsA cost that has both fixed and variable components
relevant rangeThe level of activity for which assumptions underlying CVP are expected to hold true
scattergraphA simplistic mapping of observed data points, where a line is "visually" drawn to represent the estimated cost function
step costA cost function that is fixed over a range, and then increases by a measured step to a new level at the next higher increment of activity
target incomeA level of income that is to be obtained; CVP projects activity levels necessary to achieve this benchmark
variable costA per unit cost that is the same regardless of volume; total variable cost increases with volume increases
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