A cost that could be eliminated in whole or in part if a different course of action is taken that would either end the need for the activity or increase efficiency
Differential Cost
A cost that differs between alternatives, also known as incremental cost or relevant cost.
Imputed Cost
A relevant cost in decision making but one for which information might not be available.
Absorption Costing (full costing)
A type of product costing that assigns fixed overhead units produced as a product cost
Contribution margin rate
A ratio of contribution margin to price computed as (P-VC), where p is price and vc is variable cost
Margin of safety
The excess of actual or budgeted sales over sales at the breakeven point. It is the amount by which sales could decrease before losses occur
Variable costing
A type of product costing that assigns fixed overhead units produced as a product cost
Cost-volume-Profit analysis
Sometimes called breakeven analysis, key factors are revenues, fixed costs, and variable costs
Contribution margin per unit
Sales price less variable cost per unit
Breakeven point in units
Total fixed costs divided by price less variable costs per unit
Breakeven point in sales dollars
Total fixed costs divided by (price less variable costs divided by price)
Determining the number of units to generate a profit
Total fixed costs plus net income before taxes divided by price less variable costs