Thursday, March 28, 2013

Terms of the Week-Business Dictionary (Part II)

Cost control
The process or activity on controlling costs associated with an activity, process, or company. Cost control typically includes
(1) Investigative procedures to detect variance of actual costs from budgeted costs
(2) Diagnostic procedures to ascertain the cause(s) of variance
&
(3) Corrective procedures to effect realignment between actual and budgeted costs.

Marginal cost
The increase or decrease in the total cost of a production run for making one additional unit of an item. It is computed in situations where the breakeven point has been reached: the fixed costs have already been absorbed by the already produced items and only the direct (variable) costs have to be accounted for. Marginal costs are variable costs consisting of labor and material costs, plus an estimated portion of fixed costs (such as administration overheads and selling expenses). In companies where average costs are fairly constant, marginal cost is usually equal to average cost. However, in industries that require heavy capital investment (automobile plants, airlines, mines) and have high average costs, it is comparatively very low. The concept of marginal cost is critically important in resource allocation because, for optimum results, management must concentrate its resources where the excess of marginal revenue over the marginal cost is maximum. Also called choice cost, differential cost or incremental cost.

Net price
A final price after deducting all discounts and rebates.

Vision statement
An aspirational description of what an organization would like to achieve or accomplish in the mid-term or long-term future. It is intended to serves as a clear guide for choosing current and future courses of action.

Opportunity cost
A benefit, profit, or value of something that must be given up to acquire or achieve something else. Since every resource (land, money, time, etc.) can be put to alternative uses, every action, choice, or decision has an associated opportunity cost. Opportunity costs are fundamental costs in economics, and are used in computing cost benefit analysis of a project. Such costs, however, are not recorded in the account books but are recognized in decision making by computing the cash outlays and their resulting profit or loss.

Austerity budget
A budget that is imposed on a country by its government with the purpose of reducing the national deficit by way of cutting down on consumer spending.

Earmark
The act of setting something aside for a specific use or purpose in the future. For example, goods may be earmarked prior to being exported in the future. Most commonly used to refer to funds that have been set aside in order to pay for a specific project.

Masters of Business Administration (MBA)
An advanced college degree, earned by those who successfully graduate from their college or university's MBA program. As with other advanced degrees, traditionally a student will have already received a Bachelors degree in some area of study, before working towards his or her MBA. A typical MBA program deals with multiple aspects of business, including finance and management skills. Also called Masters in Business Administration or Master of Business Administration.

Yankee bond
Dollar denominated bond sold in the US by a foreign bank, corporation, or government utility. It the US equivalent of Eurobond.

Tax holiday
A temporary period, during which time the government removes certain taxes (usually sales tax) on certain items, in order to encourage the consumption or purchase of these items. The most common application of this is a tax-free weekend, which most states hold shortly before school begins in the fall, during which time sales tax is removed on clothing, school supplies, and/or other similar items. Not all areas engage in tax holidays; it is up to the government of that area.

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