Activity-Based Costing (ABC) is a method of assigning overhead and indirect costs—such as salaries and utilities—to products and services.
Actual cost refers to the tangible expenditure incurred in carrying out specific activities of an organization, as opposed to budgeted or standard costs. It represents the real outlay of funds, including invoices paid, wages, materials, and other expenses.
Alternative costs are the costs that would apply if an alternative set of assumptions were adopted, and they represent the benefits foregone when a second-ranked alternative is compared to the chosen alternative.
A graphical depiction of the average cost per unit to produce a product for a given level of output based on current technology and scale employed by existing firms.
A critical financial concept, the break-even point represents the point at which total revenues equal total costs, resulting in neither profit nor loss. It is widely used in finance, real estate, and securities to determine financial health.
A Cost Function is a formula or equation that represents how specific costs behave when visualized on a graph. It typically depicts total cost as the sum of fixed costs and variable costs.
A curvilinear cost function represents any cost relationship where the cost does not change proportionally with the level of activity. This type of cost function forms a curved line when plotted on a graph.
A Decision Package is a crucial procedure in Zero-Base Budgeting (ZBB) where a manager details recommended and alternative ways to undertake a proposed project, specifying the associated costs and time requirements.
Economic value is the present value of future cash flows expected to be generated by an asset. It provides a measure of the worth of an asset considering its future income and cost streams.
A technique used for predicting cost behavior by analyzing the highest and lowest activity levels in a dataset to create a cost function. Though simple, it lacks mathematical rigor and precision.
Implicit cost elements refer to the costs associated with missed opportunities in the utilization of a company's resources. These costs are not directly compensated through cash transactions but reflect the opportunity cost of applied resources.
Investment costs are the expenditures incurred when an individual or organization allocates money to acquire investments or assets, often with the anticipation of generating returns over time.
A strategic choice in business operations regarding whether to produce goods internally or to purchase them from external suppliers. It involves evaluating various factors including cost, capacity, quality, and opportunity costs.
A graphical depiction representing the marginal cost experienced by a producer at various levels of production.
Marginal Cost Pricing sets product prices based solely on the product's marginal costs. It is typically employed in exceptional situations where competition is intense.
Net Realizable Value (NRV) is a key metric in inventory accounting that measures the estimated amount a business expects to receive from the sale of inventory, minus any estimated costs to complete the sale.
Productivity variance measures the differences between expected and actual output levels and efficiency, helping businesses refine production processes.
A comprehensive budget set for the purchasing function of an organization under a system of budgetary control, planning the volumes and costs of purchases to be made in a budget period, typically analyzed by material and accounting period.
The sum of all expenditure incurred during an accounting period within an organization, on a product, or on a process. Total costs are often analyzed into fixed costs and variable costs.
