31. Glossary Flashcards
Break-even point
Definition
the level of output at which totall costs equal total revenue, when neither a profit nor a loss is made.
Cost centre
Definition
the section of a business, such as a department or a product, that incurs the costs.
Direct cost
Definition
these costs can be clearly identified with each unit of production and can be allocated to a cost centre.
Indirect cost
Definition
costs that cannot be identified with a unit of production or allocated accurately to a cost centre.
Fixed cost
Definition
costs that do not vary with output in the short run.
Variable cost
Definition
costs that vary with output.
Total cost
Definition
Sum of fixed and variable cost
Profit centre
Definition
section of a business to which both costs and revenues can be allocated, so profit can be calculated.
Average cost
Definition
total cost divided by the number of units produced.
Full costing
Definition
method of costing in which all indirect and direct costs are allocated to the products, services or divisions of a business.
Contribution costing
Definition
costing method that allocates only direct costs to cost centres and profit centres, not overhead costs.
Marginal cost
Definition
the additional cost of producing one more unit of output.
Break even analysis
Definition
uses cost and revenue data to determine the break-even point of production.
Margin of safety
Definition
the amount by which the current output level exceeds the break-even level of output.
Contribution per unit
Definition
price of a product less the direct (variable) costs of producing it.
