KPI Portal

Opportunity costs

Opportunity costs measure what the firm forgoes when it chooses a specific action. The notion of opportunity costs is crucial in decision making.Variables: cost of capital, avg net valueCalculation: Cost of capital * average net valueMeasured as: Value ($/€), Interpretation of results: Lower is better

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Residual Income

Some firms use this KPI to overcome some of the incentive deficiencies of ROI, such as underinvesting. Residual income measures divisional performance by subtracting the opportunity cost of capital employed from division profits.Variables: Opportunity costs of capital employed, division profitsCalculation: Division profits - Opportunity costMeasured as: Value ($/€), Interpretation of ...

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Direct costs

Direct costs of a product or service are those items that are easily traced to the product or service. Direct labor and direct material costs are direct costs.Variables: Direct labor, direct materialCalculation: Sum of all direct labor and direct material costs.Measured as: Value ($/€), Interpretation of results: Lower is better

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Period costs

Period costs are those costs that are expensed in the period in which they are incurred. They include all non-manufacturing accounting costs incurred to sell the product, e.g. administration, distribution, warehousing and selling.Variables: All costs expensed in the period in which they are incurred.Calculation: Sum of the period costsMeasured as: ...

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Product costs

Product costs include all those accounting costs incurred to manufacture a product. These type of costs are inventoried and expensed only when the product is sold.Variables: All costs to manufacture a productCalculation: Sum of all costs to manufacture a productMeasured as: Value ($/€), Interpretation of results: Lower is better

Posted in All private sectors, Finance & Control, Financial, KPI | No Comments »