Costing and Decision Making

Balanced Scorecard

A strategy performance management tool that includes financial and non-financial measures to monitor and measure effectiveness of processes, strategies, and outcomes

Time-Driven Activity-Based Costing

A variant of ABC that determines costs based on the time required to perform activities

Variable Costs

Costs that change in proportion to the level of production or sales

Fixed Costs

Costs that do not change with the level of production or sales

Cost Assignment

Allocating costs to different departments, products, or services based on relevant cost drivers

Activity-Based Costing (ABC)

A costing method that assigns the cost of each activity to products and services based on actual consumption

Cost Driver

A factor that causes a change in the cost of an activity

Process Improvements

Actions taken to enhance the efficiency, quality, or performance of specific processes within an organization

Activity-Based Cost

Activity Minutes multiplied by Cost per Minute

Peak-Usage Hourly Rate

Average Cost Per Hour multiplied by ((Peak Hours + Excess Capacity Hours) divided by Peak Hours)

Support Costs per Meal

Fixed Costs divided by Number of Meals Served

Unused Capacity

Practical Capacity minus Used Capacity

Cost of Unused Capacity

The cost associated with the difference between practical capacity and used capacity

Cost Recomputation

Recalculating costs based on changes in demand, capacity, or other variables

Capacity Cost Rate

The cost per unit of capacity, calculated as total cost divided by practical capacity

Practical Capacity

The maximum amount of work that can be completed in a specific period under normal working conditions

Unassigned Costs

Total Committed Resource Costs minus Total Assigned Costs

Average Cost Per Hour

Total Cost divided by Total Hours

Net Income

Total revenue minus total expenses for a given period