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The unit cost is the price incurred by a company to produce, store and sell one unit of a particular product. Unit costs include all fixed costs and all variable costs involved in production. Cost unit is a form of measurement of volume of production or service.
Total costs = fixed costs + (unit variable cost × number of units) Total revenue = sales price × number of unit These are linear because of the assumptions of constant costs and prices, and there is no distinction between units produced and units sold, as these are assumed to be equal.
Cost-plus pricing is a pricing strategy by which the selling price of a product is determined by adding a specific fixed percentage (a "markup") to the product's unit cost. Essentially, the markup percentage is a method of generating a particular desired rate of return.
The average cost is computed by dividing the total cost of goods available for sale by the total units available for sale. This gives a weighted-average unit cost that is applied to the units in the ending inventory. There are two commonly used average cost methods: Simple weighted-average cost method and perpetual weighted-average cost method. [2]
In the Cost-Volume-Profit Analysis model, costs are linear in volume. 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 used as a measure of operating leverage. [2]
In this way, ABC often identifies areas of high overhead costs per unit and so directs attention to finding ways to reduce the costs or to charge more for more costly products. Activity-based costing was first clearly defined in 1987 by Robert S. Kaplan and W. Bruns as a chapter in their book Accounting and Management: A Field Study Perspective ...
In economics, average cost (AC) or unit cost is equal to total cost (TC) divided by the number of units of a good produced (the output Q): A C = T C Q . {\displaystyle AC={\frac {TC}{Q}}.} Average cost is an important factor in determining how businesses will choose to price their products.
The profit model is the linear, deterministic algebraic model used implicitly by most cost accountants. Starting with, profit equals sales minus costs, it provides a structure for modeling cost elements such as materials, losses, multi-products, learning, depreciation etc.