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Cost–volume–profit Analysis
Cost–volume–profit (CVP), in managerial economics, is a form of cost accounting. It is a simplified model, useful for elementary instruction and for short-run decisions. Overview A critical part of CVP analysis is the point where total revenues equal total costs (both fixed and variable costs). At this break-even point, a company will experience no income or loss. This break-even point can be an initial examination that precedes a more detailed CVP analysis. CVP analysis employs the same basic assumptions as in breakeven analysis. The assumptions underlying CVP analysis are: * The behavior of both costs and revenues is linear throughout the relevant range of activity. (This assumption precludes the concept of volume discounts on either purchased materials or sales.) * Costs can be classified accurately as either fixed or variable. * Changes in activity are the only factors that affect costs. * All units produced are sold (there is no ending finished goods inventory). * When ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Managerial Economics
Managerial economics is a branch of economics involving the application of economic methods in the organizational decision-making process.* * * Economics is the study of the production, distribution, and consumption of goods and services. Managerial economics involves the use of economic theories and principles to make decisions regarding the allocation of scarce resources. It guides managers in making decisions relating to the company's customers, competitors, suppliers, and internal operations.Directorate of Distance Education (no date) Directorate Of Distance Education. Available at: https://distanceeducationju.in/ (Accessed: April 23, 2023). Managers use economic frameworks in order to optimize profits, resource allocation and the overall output of the firm, whilst improving efficiency and minimizing unproductive activities. These frameworks assist organizations to make rational, progressive decisions, by analyzing practical problems at both micro and macroeconomic levels. M ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Contribution Margin
Contribution margin (CM), or dollar contribution per unit, is the selling price per unit minus the variable cost per unit. "Contribution" represents the portion of sales revenue that is not consumed by variable costs and so contributes to the coverage of fixed costs. This concept is one of the key building blocks of break-even analysis.Farris, Paul W.; Neil T. Bendle; Phillip E. Pfeifer; David J. Reibstein (2010). ''Marketing Metrics: The Definitive Guide to Measuring Marketing Performance.'' Upper Saddle River, New Jersey: Pearson Education, Inc. . The Marketing Accountability Standards Board (MASB) endorses the definitions, purposes, and constructs of classes of measures that appear in ''Marketing Metrics'' as part of its ongoinCommon Language: Marketing Activities and Metrics Project In cost-volume-profit analysis, a form of management accounting, contribution margin—the marginal profit per unit sale—is a useful quantity in carrying out various calculations, and can be us ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Throughput Accounting
Throughput accounting (TA) is a principle-based and simplified management accounting approach that provides managers with decision support information for enterprise profitability improvement. This approach identifies the factors which limit an organization's ability to reach its goals, and then focuses on simple measures that drive behavior in key areas aimed at reaching those goals. TA was proposed by Eliyahu M. Goldratt as an alternative to traditional cost accounting. It differs from costing, in it is cash focused and does not allocate all costs (variable and fixed expenses, including overheads) to products and services sold or provided by an enterprise, and it does not replace the need to prepare formal company accounts, although promoters of TA note that management decisions are not generally based on formal company accounts anyway. Only costs that vary totally with units of output (see the definition of TVC below) e.g. raw materials, are allocated to products and services ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Activity-based Costing
Activity-based costing (ABC) is a costing method that identifies activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption by each. Therefore, this model assigns more indirect costs ( overhead) into direct costs compared to conventional costing. The UK's Chartered Institute of Management Accountants (CIMA), defines ABC as an approach to the costing and monitoring of activities which involves tracing resource consumption and costing final outputs. Resources are assigned to activities, and activities to cost objects based on consumption estimates. The latter utilize cost drivers to attach activity costs to outputs. The Institute of Cost Accountants of India says, ABC systems calculate the costs of individual activities and assign costs to cost objects such as products and services on the basis of the activities undertaken to produce each product or services. It accurately identifies sources of profit and ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Break-even Analysis
The break-even point (BEP) in economics, business—and specifically cost accounting—is the point at which total cost and total revenue are equal, i.e. "even". In layman's terms, after all costs are paid for there is neither profit nor loss. In economics specifically, the term has a broader definition; even if there is no net loss or gain, and one has "broken even", opportunity costs have been covered and capital has received the risk-adjusted, expected return. The break-even analysis was developed by Karl Bücher and Johann Friedrich Schär. Overview The break-even point (BEP) or break-even level represents the sales amount—in either unit (quantity) or revenue (sales) terms—that is required to cover total costs, consisting of both fixed and variable costs to the company. Total profit at the break-even point is zero. It is only possible for a firm to pass the break-even point if the dollar value of sales is higher than the variable cost per unit. This means that the sellin ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Breakeven
Break-even (or break even), often abbreviated as B/E in finance (sometimes called point of equilibrium), is the point of balance making neither a profit nor a loss. It involves a situation when a business makes just enough revenue to cover its total costs. Any number below the break-even point constitutes a loss while any number above it shows a profit. The term originates in finance but the concept has been applied in other fields. In economics In economics and business, specifically cost accounting, the break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even". A profit or loss has not been made, although opportunity costs have been "paid" and capital has received the risk-adjusted, expected return. In other words, it is the point at which the total revenue of a business exceeds its total costs, and the business begins to create wealth instead of consuming it. It is shown graphically as the point ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Shear Mapping
In plane geometry, a shear mapping is an affine transformation that displaces each point in a fixed direction by an amount proportional to its signed distance function, signed distance from a given straight line, line parallel (geometry), parallel to that direction. This type of mapping is also called shear transformation, transvection, or just shearing. The transformations can be applied with a shear matrix or transvection, an elementary matrix that represents the Elementary row operations#Row-addition transformations, addition of a multiple of one row or column to another. Such a matrix (mathematics), matrix may be derived by taking the identity matrix and replacing one of the zero elements with a non-zero value. An example is the linear map that takes any point with Cartesian coordinates, coordinates (x,y) to the point (x + 2y,y). In this case, the displacement is horizontal by a factor of 2 where the fixed line is the -axis, and the signed distance is the -coordinate. Not ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Matching Principle
In accrual basis accounting, the matching principle (or expense recognition principle) dictates that an expense should be reported in the same period as the corresponding revenue is earned. The revenue recognition principle states that revenues should be recorded in the period in which they are earned, regardless of when the cash is transferred. By recognising costs in the period they are incurred, a business can determine how much was spent to generate revenue, thereby reducing discrepancies between when costs are incurred and when revenue is realised. In contrast, cash basis accounting requires recognising an expense when the cash is paid, irrespective of when the expense was incurred.Accounting Principles by Wild, Shaw, Chiappetta If no cause-and-effect relationship exists (e.g., a sale is impossible), costs are recognised as expenses in the accounting period in which they expired, i.e., when the product or service has been used up or consumed (e.g., spoiled, dated, or subst ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Cost Accounting
Cost accounting is defined by the Institute of Management Accountants as "a systematic set of procedures for recording and reporting measurements of the cost of manufacturing goods and performing services in the aggregate and in detail. It includes methods for recognizing, allocating, aggregating and reporting such costs and comparing them with standard costs". Often considered a subset or quantitative tool of Management accounting, managerial accounting, its end goal is to advise the management on how to optimize business practices and processes based on cost efficiency and capability. Cost accounting provides the detailed cost information that management needs to control current operations and plan for the future. Cost accounting information is also commonly used in financial accounting, but its primary function is for use by managers to facilitate their decision-making. Origins of cost accounting All types of businesses, whether manufacturing, trading or producing services, r ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Total Revenue
Total revenue is the total receipts a seller can obtain from selling goods or services to buyers. It can be written as ''P × Q'', which is the price of the goods multiplied by the quantity of the sold goods. Perfect competitor A perfectly competitive firm faces a demand curve that is infinitely elastic Elastic is a word often used to describe or identify certain types of elastomer, Elastic (notion), elastic used in garments or stretch fabric, stretchable fabrics. Elastic may also refer to: Alternative name * Rubber band, ring-shaped band of rub .... That is, there is exactly one price that it can sell at – the market price. At any lower price it could get more revenue by selling the same amount at the market price, while at any higher price no one would buy any quantity. Total revenue equals the market price times the quantity the firm chooses to produce and sell. Monopoly As with a perfect competitor, a monopolist’s total revenue is the total receipts it can obtain ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
