chapter 31 costs Flashcards
break-even point
the level of output at which total costs equal total revenue, where neither a profit nor a loss is made
cost centre
the section of a business , such as a department or a product , that incurs the costs
direct costs
these costs can be clearly identified with each unit of production and can be allocated to a cost centre
indirect costs
costs that cannot be identified with a unit of production or allocated accurately to a cost centre
fixed costs
costs that do not vary with output in the short run
variable costs
costs that vary with output
total costs
variable cost plus fixed cost
profit centre
a section of a business to which both costs and revenues can be allocated, so profit can be calculated
average cost
total cost divided by the number of units produced
full costing
a method of costing in which all indirect and direct costs are allocated to the products , services or divisions of a business
contribution costing
costing method that allocates only direct costs to cost centre , not overhead costs
marginal cost
the additional cost of producing one more unit of output
break-even analysis
uses cost and revenue data to determine the break- even point of production
margin of safety
the amount by which the current output level exceeds the break-even level of output
contribution per unit
the price of a product less the direct (variable) costs of producing it
