Reference

Glossary of small-business managerial-accounting terms.

The vocabulary that turns up in P&L statements, SCORE-mentor sessions, and AICPA managerial-accounting materials. Each entry is short and links to longer treatment where one exists.

AICPA: American Institute of Certified Public Accountants. The professional body administering the CPA Examination and the AICPA Code of Professional Conduct in the United States.
Break-even: The unit volume (or revenue) at which total revenue equals total cost. Below break-even the business loses money; above, it earns. See the break-even formula page.
Burn rate: The monthly net cash outflow of a business operating below break-even. Distinct from break-even loss because it includes non-P&L items like working-capital changes and capex.
Contribution margin: Price per unit minus variable cost per unit. The dollar amount each unit contributes to fixed-cost recovery and, beyond break-even, to profit. See the contribution margin page.
Contribution-margin ratio: Contribution margin per unit divided by price, expressed as a percentage. Used to compute break-even in revenue terms: revenueₙₐ = fixed cost / CM ratio.
Cost-plus pricing: A pricing approach that sets price by adding a target margin to total cost per unit. Simple but ignores willingness to pay.
CPA: Certified Public Accountant. The US accountancy designation administered by state boards under AICPA-uniform examination rules.
Direct cost: A cost directly attributable to producing a unit of output. Most direct costs are variable, though direct labour can be fixed for shift workers.
Fixed cost: A cost that does not change with output volume within the relevant range. Rent, base salaries, insurance, software subscriptions. See the fixed vs variable page.
GAAP: Generally Accepted Accounting Principles. The US financial-reporting framework. Distinct from managerial accounting, which is internal and need not follow GAAP.
High-low method: A simple method for decomposing a mixed cost into fixed and variable components by comparing total cost at the highest and lowest observed activity levels.
Margin of safety: The percentage by which current sales exceed break-even sales. Indicates how much volume could be lost before the business stops covering fixed cost. See the margin of safety page.
Mixed cost: A cost with both a fixed component and a variable component (typical of utilities). Decomposed for break-even purposes via the high-low method or regression.
Operating leverage: The proportion of fixed cost in the total cost structure. High operating leverage means a high contribution margin per unit but a steep climb to break-even and amplified profit volatility.
Owner’s draw: Cash withdrawn by the owner of a sole proprietorship or partnership. For break-even purposes, treat a market-rate equivalent as fixed cost.
P&L: Profit and loss statement. The income-statement view of the business: revenue, cost of goods sold, gross profit, operating expenses, operating profit. The starting point for cost classification.
Relevant range: The output volume range over which fixed and variable cost behaviour is approximately linear. Outside the relevant range, fixed costs step and variable cost rates change.
SBA: Small Business Administration. The US federal agency supporting small business through loan-guarantee programs, SCORE mentoring, and Small Business Development Centers.
SCORE: Service Corps Of Retired Executives. A volunteer mentor network operating under the SBA, providing free business mentoring to US small-business owners.
Step-fixed cost: A cost that is fixed within a range and steps up at a threshold (e.g., a second supervisor when shifts double). Treated as fixed at the planning volume; crossing the threshold invalidates the calculation.
Target profit: The unit volume required to cover fixed cost plus a desired profit. Computed as (fixed cost + target profit) / contribution margin per unit.
Total cost: Fixed cost plus variable cost. Equal to total revenue at the break-even point.
Value-based pricing: A pricing approach anchored in customer willingness to pay (the value delivered), rather than cost or competitor pricing. Typically yields higher contribution margins than cost-plus.
Variable cost: A cost that changes proportionally with output volume. Materials, packaging, payment-processor percentage fees, sales commissions. See the fixed vs variable page.
Variable cost per unit: Total variable cost divided by units produced. The denominator in the contribution-margin calculation.
Weighted-average contribution margin: The blended contribution margin across a multi-product mix, used for break-even calculations when sales mix is stable.