Absorption Costing - A costing method that includes all manufacturing cost in unit product cost. This will include direct materials, direct labor and both variable and fixed manufacturing overhead.
Common Fixed Cost - A fixed cost that supports more than one business segment, but is not traceable in whole or in part to any one of the business segment. Even if that segment were entirely eliminated, there would be no change in a true common fixed cost.
Segment - Any part or activity of an organization about which managers seek cost, revenue, or profit data.
Segment Margin - A segment contribution margin less its traceable fixed cost. it represents the margin available after a segment has covered all of its own traceable costs. The segment margin is the best gauge of the long run profitability of a segment because it includes only those costs that are caused by the segment. If a segment can't cover its own costs, then that segment probably should be dropped.
Traceable fixed cost - a fixed cost that is incurred because of the existence of a particular business segment and that would be eliminated.
Variable costing - A costing method that includes only variable manufacturing costs ( direct materials, direct labor and both variable manufacturing overhead ) in product costs.
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