|cost driver analysis
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Definition of cost driver analysis
cost driver analysis
the process of investigating, quantifying,
Schedule of depreciation rates allowed for tax purposes.
The argument that specifies that the various agency costs create a complex environment in
The incremental costs of having an agent make decisions for a principal.
Total costs, explicit and implicit.
A firm's required payout to the bondholders and to the stockholders expressed as a
The argument that expected indirect and direct bankruptcy costs offset the other
A method developed by BARRA, a consulting firm in
An analysis of the level of sales at which a project would make zero profit.
costs that increase with increases in the level of investment in current assets.
A statistical technique that identifies clusters of stocks whose returns are highly correlated
The representing of accounting information over multiple years as percentages
A method of analysis in which a firm is compared to others that have a desired
Arrangement whereby the shareholders of a project receive output free of
The required return for a capital budgeting project.
Related: Net financing cost
Cost of funds
Interest rate associated with borrowing money.
Cost of lease financing
A lease's internal rate of return.
Cost of limited partner capital
The discount rate that equates the after-tax inflows with outflows for capital
The net present value of an investment divided by the investment's initial cost. Also called
The process of analyzing information on companies and bond issues in order to estimate the
A statistical process that links the probability of default to a specified set of financial ratios.
Equivalent annual cost
The equivalent cost per year of owning an asset over its entire life.
The difference between the execution price of a security and the price that would have
A statistical procedure that seeks to explain a certain phenomenon, such as the return on a
Financial distress costs
Legal and administrative costs of liquidation or reorganization. Also includes
A cost that is fixed in total for a given period of time and for given production levels.
costs, both implied and direct, associated with a transaction. Such costs include time, effort,
Security analysis that seeks to detect misvalued securities by an analysis of the firm's
An analysis of returns using total return to assess performance over some investment horizon.
The process of dividing each expense item of a given year by the same expense item in
Incremental costs and benefits
costs and benefits that would occur if a particular course of action were
Transaction costs that include the assessment of the investment merits of a financial asset.
Market impact costs
Also called price impact costs, the result of a bid/ask spread and a dealer's price concession.
Market timing costs
costs that arise from price movement of the stock during the time of the transaction
Evaluation of risky prospects based on the expected value and variance of possible outcomes.
Multiple-discriminant analysis (MDA)
Statistical technique for distinguishing between two groups on the
Net financing cost
Also called the cost of carry or, simply, carry, the difference between the cost of financing
Opportunity cost of capital
Expected return that is foregone by investing in a project rather than in
The difference in the performance of an actual investment and a desired investment
Performance attribution analysis
The decomposition of a money manager's performance results to explain
Price impact costs
Related: market impact costs
Pro forma capital structure analysis
A method of analyzing the impact of alternative capital structure
A statistical technique that can be used to estimate relationships between variables.
cost to replace a firm's assets.
Round-trip transactions costs
costs of completing a transaction, including commissions, market impact
The use of horizon analysis to project bond total returns under different reinvestment rates
costs associated with locating a counterparty to a trade, including explicit costs (such as
analysis of the effect on a project's profitability due to changes in sales, cost, and so on.
costs that fall with increases in the level of investment in current assets.
costs that have been incurred and cannot be reversed.
Security analysis that seeks to detect and interpret patterns in past security prices.
costs of buying and selling marketable securities and borrowing. Trading costs include
The time, effort, and money necessary, including such things as commission fees and the
True interest cost
For a security such as commercial paper that is sold on a discount basis, the coupon rate
A cost that is directly proportional to the volume of output produced. When production is zero,
The process of dividing each expense item in the income statement of a given year by net
Weighted average cost of capital
Expected return on a portfolio of all the firm's securities. Used as a hurdle
An assetâ€™s purchase price, plus costs associated with the purchase, like installation fees, taxes, etc.
Cost of goods sold
The cost of merchandise that a company sold this year. For manufacturing companies, the cost of raw
MACRS (Modified Accelerated Cost Recovery System)
A depreciation method created by the IRS under the Tax Reform Act of 1986. Companies must use it to depreciate all plant and equipment assets installed after December 31, 1986 (for tax purposes).
A financial analysis technique that relates key amounts on the income statement and balance sheet to a 100 percent or base figure for the present and previous year.
A method of costing in which all fixed and variable production costs are charged to products or services using an allocation base.
A method of costing that uses cost pools to accumulate the cost of significant business activities and then assigns the costs from the cost pools to products or services based on cost drivers.
costs that are identifiable with and able to be influenced by decisions made at the business
The amount of cash expended.
A resource sacrificed or forgone to achieve a specific objective (Horngren et al.), defined
The idea that fixed costs and variable costs react differently to changes in the volume of
A division or unit of an organization that is responsible for controlling costs.
The process of either reducing costs while maintaining the same level of productivity or maintaining costs while increasing productivity.
The most significant cause of the cost of an activity, a measure of the demand for an activity
Anything for which a measurement of cost is required â€“ inputs, processes, outputs or responsibility centres.
Cost of capital
The costs incurred by an organization to fund all its investments, comprising the risk-adjusted
Cost of goods sold
See cost of sales.
Cost of manufacture
The cost of goods manufactured for subsequent sale.
Cost of quality
The difference between the actual costs of production, selling and service and the costs that would be incurred if there were no failures during production or usage of products or services.
Cost of sales
The manufacture or purchase price of goods sold in a period or the cost of providing a service.
A method of pricing in which a mark-up is added to the total product/service cost.
The costs of (cross-functional) business processes, irrespective of the organizational structure of the business.
Costâ€“volumeâ€“profit analysis (CVP)
A method for understanding the relationship between revenue, cost and sales volume.
costs that are readily traceable to particular products or services.
costs that do not change with increases or decreases in the volume of goods or services
The cost of a product/service that includes an allocation of all the (production and
costs that are necessary to produce a product/service but are not readily traceable to particular products or services â€“ see overhead.
A method of accounting that accumulates the costs of a product/service that is produced either
The non-salary or wage costs that follow from the payment of salaries or wages, e.g. National
An approach to costing that estimates and accumulates the costs of a product/service over
The cost of producing one extra unit.
The lost opportunity of not doing something, which may be financial or non-financial, e.g. time.
The costs that relate to a period of time.
The total of all direct costs.
A method of costing for continuous manufacture in which costs for an accounting compared are compared with production for the same period to determine a cost per unit produced.
The cost of goods or services produced.
A method of analysing financial reports to interpret trends and make comparisons by using ratios â€“ two numbers, with one generally expressed as a percentage of the other.
The cost that is relevant to a particular decision â€“ future, incremental cash flows.
costs that are constant within a defined level of activity but that can increase or decrease when
costs that have both fixed and variable components.
An approach to understanding how changes in one variable of costâ€“volumeâ€“profit analysis are affected by changes in the other variables.
A budget cost for materials and labour used for decision-making, usually expressed as a per unit cost that is applied to standard quantities from a bill of materials and to standard times from a
costs that have been incurred in the past.
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