The fixed cost coverage calculation is a calculation method of the business cost accounting.
Definition / explanation
The fixed cost coverage calculation is, in contrast to the single-level contribution margin calculation, a multi-level contribution margin calculation.
The fixed costs are not considered in their entirety, but in great detail according to their degree of attribution to the individual products. The fixed costs are divided according to the polluter pays principle.
In the first step, the variable costs are deducted from the revenues. This is how the contribution margin is calculated.
The additional contribution margins are then determined by subtracting additional fixed costs as a whole from the previous result.
The grading is based on the degree of attribution. The operating result is obtained as the result of the fixed cost calculation.
Application in practice
The fixed costs are divided according to the degree of their attributability into
- Fixed product costs
- Production ice group fixed costs
- Fixed cost center costs
- Area fixed costs
- Company fixed costs
The attributability of the various fixed costs to a very specific product depends on an appropriate allocation of the individual costs. This means that the direct cost character of the fixed costs determines the allocation.
A coding of the fixed costs according to the number of employees or the like is prohibited in the fixed cost coverage calculation. If a cost element is coded in any way, the principle of fixed cost coverage, i.e. the allocation of costs based on the cause, is violated.