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1259 results for "setup cost"

The cost associated with setting up a piece of production equipment. This would include the cost of the setup mechanic, the cost of scheduling, record keeping, moving the starting material, and testing the first few...

What is setup cost? Author: Harold Averkamp, CPA, MBA Definition of Setup Cost In manufacturing, setup cost is the cost incurred to get equipment ready to process a different batch of goods. Hence, setup cost is regarded...

to the batch of products that will be run after the setup occurs. 9. Setup cost is an example of a batch-level cost. True Right! Setting up a machine is directly associated with the batch of items that will be processed...

Our Explanation of Activity Based Costing illustrates how manufacturing overhead costs for a product will differ when costs are allocated using only the number of machine hours, as opposed to being allocated using the...

Activity Based Costing Author: Harold Averkamp, CPA, MBA 19 Q&A Popular Recent What is cost accounting What is cost allocation? What is the traditional method used in cost accounting? What is a cost driver? What are...

overhead rate? What is the difference between a budget and a standard? What is setup cost? What is elastic demand? What are production costs? What is inventory valuation? How do you calculate opportunity costs? Why use...

A formula that calculates the optimum quantity to be purchased (or produced) so as to minimize the combined total cost of carrying inventory and processing additional purchase orders (or production setups). The formula...

. However, the cost of the lost opportunity to be producing profitable output during the setup time is not an out-of-pocket cost. (The cost of not earning profits during the setup time, known as an opportunity cost, is...

, the company’s opportunity cost for setting up the machine is $560. A bean counter might look in the company’s payroll records and say that the cost of setting up the machine is 4 hours X $40 (the hourly wage and...

In activity-based costing this refers to the allocation of costs to activities. For example, allocating the costs of setting up the manufacturing equipment to run a batch of product to the activity “setup...

In accounting, cost is defined as the cash amount (or the cash equivalent) given up for an asset. Cost includes all costs necessary to get an asset in place and ready for use. For example, the cost of an item in...

Is rent expense a period cost or a product cost? Author: Harold Averkamp, CPA, MBA Definition of Rent Expense Rent expense is often a monthly amount paid by a company for use of a building. Typically, the rent is due on...

In activity-based costing, this refers to the number of items that will be produced after a machine has been setup.

Usually this refers to manufacturing employees who are not classified as direct labor. Material handlers, mechanics, setup workers, clean up workers are a few examples of indirect labor.

What is an indirect cost? Author: Harold Averkamp, CPA, MBA Definition of Indirect Cost An indirect cost is a cost that is not directly traceable to a cost object (product, department, etc.). Rather, the indirect cost is...

A cost associated with a batch of items, but not directly traceable to an individual item within the batch. For example, the cost to set up a machine to run a batch of 5,000 items is a batch-level cost. This cost must...

In manufacturing, the product cost includes direct materials, direct labor, and manufacturing overhead. A retailer’s product cost is the net cost from suppliers plus costs to get the product in place and ready for...

A cost that can be traced to a cost object. For example, the flour used in baking bread is a direct cost of a bakery’s bread. The wages and salaries of the employees working exclusively in a manufacturer’s...

The change in total costs in response to the change in some activity. For example, some of the costs of owning and operating a vehicle will increase in total with an increase in miles driven. These are referred to as...

The incremental cost of storing or holding inventory. It is an annual percentage that includes the cost of rent, insurance, cost of capital, deterioration and obsolescence.

What is opportunity cost? Author: Harold Averkamp, CPA, MBA Definition of Opportunity Cost Opportunity cost is the profit that was lost or missed because of some action or failure to take some action. Some refer to...

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,...

The amount by which total costs will change when an activity is increased by one unit. In the equation of the line, y = a + bx, the variable cost rate is represented by ‘b’ and the units of activity are...

What is cost behavior? Author: Harold Averkamp, CPA, MBA Definition of Cost Behavior Cost behavior is an indicator of how a cost will change in total when there is a change in some activity. In cost accounting and...

This phrase has two connotations. One is the cost of holding inventory. In this case the carrying cost is the cost of capital tied up in inventory, the cost of storage, insurance, and obsolescence. Often this is...

What is a standard cost? Author: Harold Averkamp, CPA, MBA Definition of Standard Cost A standard cost is described as a predetermined cost, an estimated future cost, an expected cost, a budgeted unit cost, a forecast...

A current or future cost that will differ among alternatives. For example, if a company is deciding whether to expand its sales territory, the real estate tax and depreciation on the company’s headquarters building...

What is a cost center? Author: Harold Averkamp, CPA, MBA Definition of Cost Center A cost center is often a department within a company. The manager and employees of a cost center are responsible for its costs but are...

What is a fixed cost? Author: Harold Averkamp, CPA, MBA Definition of Fixed Cost A fixed cost is one that does not change in total within a reasonable range of activity. Since the fixed cost remains constant in total,...

The accounting guideline requiring amounts in the accounts and on the financial statements to be the actual cost rather than the current value. Accountants can show an amount less than cost due to conservatism, but...

What is historical cost? Author: Harold Averkamp, CPA, MBA Definition of Historical Cost Historical cost is a term used instead of the term cost. Cost and historical cost usually mean the original cost at the time of a...

A cost or expense where the total changes in proportion to changes in volume or activity. For example, if a company pays a sales commission on all of its sales, commission expense is a variable expense because...

The amount needed to replace an asset such as inventory, equipment, buildings, etc. If an asset’s replacement cost is greater than the asset’s carrying amount, the cost principle prohibits the use of the...

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