A government index that tracks the changes in prices in order to measure general inflation. This index can be used by small companies to obtain the benefits of LIFO without tracking individual units in inventory. See the...
A government index that tracks the changes in prices in order to measure general inflation. This index can be used by small companies to obtain the benefits of LIFO without tracking individual units in inventory. See the...
A dollar adjusted for inflation. If an asset such as land was purchased for $10,000 many years ago when the consumer price index (CPI) was 100 and today the CPI is 400, today’s constant-dollar amount would be...
disclosure required by Statement 33 was the reporting of the effects of general inflation as indicated by the change in the consumer price index. In other words, a large company had to disclose in the notes to its...
. The transfer price is the amount that Sub2 will pay Sub 1 for each component it needs. If Sub 1 has idle capacity, it can make an additional profit even with a transfer price of less than $20. However, Sub2 will be...
The original cost incurred to acquire an asset (as opposed to replacement cost, current cost, or cost adjusted by a general price index). If a company purchased land in 1980 for $10,000 and continues to hold that land,...
of the years 2021 through 2023. In addition the accountant might add a price index for each line which expresses each line’s amounts as a percentage of the 2021 amount. In this example the base year is 2021. Assuming...
The ratio of the market value of a share of common stock to the earnings per share of common stock. For example, if a corporation earned $3 per share and its stock is trading at $36, it’s price earnings ratio is...
The price at which one division or subsidiary of a company transfers products to another division or subsidiary of the company.
The price at which the holder of a bond must sell the bond to the issuer. For example, a corporation may have the right to redeem/buy back its bonds by paying the bondholder 110% of the bond’s face amount.
In standard costing the difference between the actual cost and the standard cost of direct materials or direct labor. The price variance of direct labor is usually referred to as the labor rate variance.
See direct materials price variance.
The current price for a commodity or other item to be delivered immediately.
The amount at which the holder of preferred stock or bonds must sell the stock or bonds back to the issuing corporation. The call price is disclosed in the indenture. The call price might be the face or par amount plus...
What is the price earnings ratio? The price earnings ratio, or P/E ratio, is the market price per share of common stock divided by the earnings per share of common stock. A corporation with a high price earnings...
See direct labor rate variance.
A variance arising in a standard costing system that indicates the difference between the actual cost of direct materials and the standard cost of direct materials. Recognizing this variance at the time the direct...
discussing disinvestment. For example, an electric generator manufacturer might sell off its consumer generator product lines and manufacturing facilities in order to raise money that can be used to expand its...
valuable. (Think Apple, Coke, Nike, etc.) Due to the cost principle, the balance sheet may be reporting trademarks at close to $0. Examples of Trademarks on the Balance Sheet Assume that Company X, a consumer products...
Segments of a business. For example, a corporation may have a consumer division and an industrial division in order to improve its effectiveness in marketing its goods.
What is the difference between cost and price? Definition of Cost and Price In accounting, the term cost can mean the cash or cash equivalent amount a company paid to acquire an asset or the amount of an expense it...
Things that are resources owned by a company and which have future economic value that can be measured and can be expressed in dollars. Examples include cash, investments, accounts receivable, inventory, supplies, land,...
In standard costing, how is the purchase price variance reclassified to arrive at actual cost? Definition of Purchase Price Variance In standard costing, the purchase price variance is the difference between the actual...
is $147,000. This amount is also known as the Social Security annual wage limit, wage base, contribution and benefit base, ceiling, tax cap, and maximum taxable earnings. The maximum amount is adjusted annually based on...
How do you compute a selling price if you know the cost and the required gross margin? Definition of Selling Price A selling price is the amount that a customer will pay to buy a product. If a retailer wants to earn a...
How do you compute the selling price of a bond? Definition of Selling Price of Bond The selling price (or the market value) of a bond is the present value of the future contractual cash amounts that are going to be...
Why does a bond's price decrease when interest rates increase? Definition of Bond’s Price A bond’s price is the present value of the following future cash amounts: The cash interest payments that occur every six...
What is elastic demand? Definition of Elastic Demand Elastic demand is the situation in which demand for a product or service is sensitive to price changes. Elastic demand is a major concern for a manufacturer that...
price). Others will use the term gross margin ratio to mean the gross margin as percentage of sales or selling price. Example of Gross Margin If a retailer sells a product for $10, and its cost was $8, the gross profit...
. An unrelated customer asks the company to inform them of the price for constructing a specific residence. The company prepares a detailed calculation of the final price that the customer will pay. The price will...
This could be the difference between cost and the selling price. For example, a retailer may markup its cost by 50% to arrive at a selling price. In the retail method of costing inventory, markup is used to mean the...
If I want a gross margin of 25%, what percent should I mark up my product? Definition of Gross Margin Gross margin as a percentage is the gross profit divided by the selling price. For example, if a product sells for...
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
A stock split, such as a 2-for-1, means that every stockholder will have twice as many shares as was held previously. Accordingly, the market price per share after the split should be one-half of the market price...
Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. The standards for the direct materials and direct labor should be __________ amounts. Select......
What is a trade discount? Definition of Trade Discount A trade discount is a routine reduction from the regular, established price of a product. The use of trade discounts allows a company to vary the final price based...
What is the contribution margin ratio? Definition of Contribution Margin Ratio The contribution margin ratio is the percentage of sales revenues, service revenues, or selling price remaining after subtracting all of the...
What is the normal balance of the direct materials variance accounts? I don’t believe there is a normal balance. If a company pays exactly the standard cost of its direct materials, there will be no balance in the...
In accounting this refers to the multiplication of quantity times price, or number of units times price or cost per unit.
Featured Review
"I am currently employed as a senior accountant. I became a PRO user back when I was seeking a new job, many years ago. Since I only obtained an associate degree in accounting, I wanted to use all the tools on your site to give me the edge to be able to learn more than ever before. Now my skill set is more advanced, and I was able to apply for my current role. I learned so much more than I have in 2 years of college. The readings and tutorial are easy to follow, and explain the ins and outs of everything. I previously had financial statements in my background, yet now I truly have a better understanding of how each account affects the TB. I continue to go back any time you offer new topics; it's my personal refresher. Just think how great it is to be able to go back and continue to learn, for a much cheaper price than a college course, for sure. I am so glad I purchased my subscription! Thank you, AccountingCoach!" - Victoria
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: