- 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)
- economies of scaleEfficiencies associated with increases in volume
- 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
