A detailed plan for the future that is usually expressed in formal quantitative terms
A series of steps that are followed to carry out some task in a business
Anything that prevents you from getting more of what you want
The process of gathering feedback to ensure that a plan is being properly executed or modified as circumstances change
Corporate Social Responsibility
A concept whereby organizations consider the needs of all stakeholders when making decisions. It extends beyond legal compliance to include voluntary actions that satisfy stakeholder expectations.
Selecting a course of action from competing alternatives
Enterprise Risk Management
a process used by a company to help identify the risks that it face and to develop repsponses to those risks that enable the company to be reasonably assured of meeting its goals
The phase of accounting concerned with providing information to stockholders, creditors, and others outside the organization.
A management approach that organizes resources such as people and machines around the flow of business processes and that only produces units in response to customer orders
The phase of accounting concerned with providing information to managers for use in planning and controlling operations and in decision making.
a detailed report comparing budgeted data to actual data
The process of establishing goals and specifying how to achieve them
A part or activity of an organization about which managers would like cost, revenue, or profit data
A company's "game plan" for attracting customers by distinguishing itself from competitiors
Theory of Constraints
A management approach that emphasizes the importance of managing constraints.
The major business functions that add value to a company's products and services such as research and development, product design, manufacturing, marketing, distribution, and customer service.
A method for analyzing cost behavior in which an account is classified as either variable or fixed based on the analyst's prior knowledge of how the cost in the account behaves.
A measure of whatever causes the incurrence of a variable cost. For example, the total cost of X-ray film in a hospital will increase as the number of X-rays taken increases.
All executive, organizational, and clerical costs associated with the general management of an organization rather than with manufacturing or selling.
Committed Fixed Costs
investments in facilities, equipment, and basic organizational structure that can't be significantly reduced even for short periods of time without making fundamental changes
A cost that is incurred to support a number of cost objects but that cannot be traced to them individually. For example, the wage cost of the pilot of a 747 airliner is a common cost of all of the passengers on the aircraft. Without the pilot, there would be no flight and no passengers. But no part of the pilot's wage is caused by any one passenger taking the flight.
an income statement format that organizes costs by their behavior; costs are separated into variable and fixed categories rather than being separated according to organizational functions
amount remaining from sales revenue after variable expenses have been deducted
Direct labor cost plus manufacturing overhead cost.
the way in which a cost reacts to changes in the level of activity
Anything for which cost data are desired. Examples of cost objects are products, customers, jobs, and parts of the organization such as departments or divisions.
the relative proportion of fixed, variable, and mixed costs in an organization
(statistics) a variable in a logical or mathematical expression whose value depends in the independent variable
A difference in cost between two alternatives. Also see Incremental cost.
The difference in revenue between two alternatives.
A cost that can be easily and conveniently traced to a specified cost object.
Factory labor costs that can be easily traced to individual units of product. Also called touch labor.
Materials that become an integral part of a finished product and whose costs can be conveniently traced to it.
Discretionary Fixed Costs
those fixed costs that arise from annual decisions by management to spend on certain fixed cost items, such as advertising and research
a detailed analysis of cost behavior based on an industrial engineer's evaluation of the inputs that are required to carry out a particular activity and of the prices of those inputs
a cost that does not change as output is increased or decreased
a method of separating a mixed cost into its fixed and variable elements by analyzing the change in cost between the high and low activity levels
An increase in cost between two alternatives. Also see Differential cost.
(statistics) a variable whose values are independent of changes in the values of other variables
A cost that cannot be easily and conveniently traced to a specified cost object.
The labor costs of janitors, supervisors, materials handlers, and other factory workers that cannot be conveniently traced to particular products.
Small items of material such as glue and nails that may be an integral part of a finished product, but whose costs cannot be easily or conveniently traced to it.
Synonym for product costs.
Least-Squares Regression Method
a method of separating a mixed cost into its fixed and variable elements by fitting a regression line that minimizes the sum of the squared errors
Linear Cost Behavior
Cost behavior is said to be linear whenever a straight line is a reasonable approximation for the relation between cost and activity.
All manufacturing costs except direct materials and direct labor.
a cost that has both fixed and variable elements
The potential benefit that is given up when one alternative is selected over another
Costs that are taken directly to the income statement as expenses in the period in which they are incurred or accrued.
Direct materials cost plus direct labor cost.
All costs that are involved in acquiring or making a product. In the case of manufactured goods, these costs consist of direct materials, direct labor, and manufacturing overhead. Also see Inventoriable costs.
Any materials that go into the final product.
The range of activity within which assumptions about variable and fixed cost behavior are valid.
All costs that are incurred to secure customer orders and get the finished product or service into the hands of the customer
A cost that has already been incurred and that cannot be changed by any decision made now or in the future.
a cost that varies, in total, in direct proportion to changes in the level of activity
the level of sales at which profit is zero
total contribution margin divided by total sales
A graphical representation of the relationships between an organization's revenues, costs, and profits on the one hand and its sales volume on the other hand.
Degree of Operating Leverage
A measure, at a given level of sales, of how a percentage change in sales will affect profits. The degree of operating leverage is computed by dividing contribution margin by net operating income
an analytical approach that focuses only on those costs and revenues that change as a result of a decision
Margin of Safety
the excess of budgeted (or actual) dollar sales over the break-even dollar sales
a measure of how sensitive net operating income is to a given percentage change in dollar sales
the relative proportions in which a company's products are sold. Sales mix is computed by expressing the sales of each product as a percentage of total sales
Target Profit Analysis
Estimating what sales volume is needed to achieve a specific target profit
Variable Expense Ratio
a ratio computed by dividing variable expenses by dollar sales