EFCB Triple E - independent subject foundations key terms

Costing method that assigns both variable and fixed production overheads to units produced, usually through predetermined overhead absorption rates, so inventory includes a share of fixed cost.

Costing method charging only variable costs to units, treating fixed costs as period costs, and using contribution to judge profitability and short-term decisions.

Selling price less variable cost per unit, the amount each unit contributes towards covering fixed costs and then generating profit; used in break-even and limiting-factor decisions.

Level of sales at which total contribution equals fixed costs, so the business makes neither profit nor loss, expressed in units or in revenue.

A future cash flow that differs between the alternatives under consideration, including opportunity costs but excluding already unavoidable sunk expenditure.

Sales revenue less variable costs within the stated decision model; it first covers fixed costs before producing an operating profit.

A scarce resource that restricts feasible activity, requiring comparison of contribution per unit of that resource when the assumptions justify it.

A budget recalculated for a specified activity level using the applicable cost behavior assumptions, allowing more meaningful performance comparisons.

An approach assigning resource costs to activities and then to products using drivers reflecting their consumption of those activities.

The allowable cost derived from a market-based price less the desired profit, used to investigate design and process alternatives.

A profit measure less a specified capital charge, requiring consistent definitions of profit, invested capital and the relevant required return.

Deliberate understatement of expected revenues or overstatement of resource needs to make a negotiated performance target easier to achieve.

The cost effect of actual material consumption differing from the standard quantity allowed for actual output, using the stated standard price.

Resources and obligations associated with the short operating cycle; any calculation must specify whether it uses net current assets or operating items.

Present value of incremental project cash flows less the initial outlay, calculated using consistent timing and an appropriate discount rate.

A discount rate that makes the specified net present value zero; nonconventional cash flows may produce multiple solutions or none.

Time required for specified cumulative cash inflows to recover the initial investment; ordinary payback does not itself incorporate discounting.

A constraint on investment funding that requires choosing feasible projects or divisible project portions under the assumptions supplied.

The benefit forgone by choosing one use of a resource rather than its next best feasible alternative.

A method of changing an input and examining its effect on a result, without automatically assigning probabilities to that input change.

A weighted cost of debt and equity financing under specified assumptions, using consistent values and treatment of any available tax shield.

Evaluation of long-term investment alternatives through incremental cash flows, financing consistency, uncertainty and relevant strategic considerations.