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Controllable cost definition

Accounting Tools

If the decision instead involves a number of individuals, then a cost is not controllable from the perspective of any one individual. Also, if a cost is imposed on an organization by a third party (such as taxes), this cost is not considered to be controllable.

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Incremental cost definition

Accounting Tools

Or, the incremental cost of shutting down a production line includes the costs to lay off employees, sell unnecessary equipment, and convert the facility to some other use. As a third example, the sale of a subsidiary includes the legal costs of the sale. Here are several examples: Overtime analysis.

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Indirect labor definition

Accounting Tools

The cost of both types of indirect labor can be fully loaded with the costs of benefits and payroll taxes for financial analysis or cost accounting purposes, since these additional costs are closely associated with the indirect labor positions.

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Total variable cost definition

Accounting Tools

If a company is in the services business, then direct labor is likely to be the largest component of its total variable cost. This is because billable hours comprise most of the cost of goods sold, along with the related costs of payroll taxes and employee benefits.

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Fixed cost definition

Accounting Tools

Related Courses Activity-Based Costing Cost Accounting Fundamentals What is a Fixed Cost? A fixed cost is a cost that does not increase or decrease in conjunction with any activities. Examples of other fixed costs are insurance, depreciation , and property taxes.

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How to calculate unit contribution margin

Accounting Tools

Related Courses Cost Accounting Guidebook Financial Analysis Unit contribution margin is the remainder after all variable costs associated with a unit of sale are subtracted from the associated revenues. It is useful for establishing the minimum price at which to sell a unit (which is the variable cost).