The accounting focused on determining the cost per unit of a manufacturer in order to value inventory and cost of goods sold. It is also used to determine unit costs of items processed in service businesses, such as a...
The accounting focused on determining the cost per unit of a manufacturer in order to value inventory and cost of goods sold. It is also used to determine unit costs of items processed in service businesses, such as a...
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...
See fixed expenses.
Costs that have both a fixed and variable component. For example, the cost of operating an automobile includes some fixed costs that do not change with the number of miles driven (e.g., operating license, insurance,...
See manufacturing costs.
A method where only the variable manufacturing costs are assigned to inventory and the cost of goods sold. Fixed manufacturing costs are viewed as expenses of the period in which they are incurred. This method is not...
A common cost. Often refers to the costs prior to the point where several products emerge from a common process.
The allocation of manufacturing overhead (indirect manufacturing costs) to products on the basis of a volume metric such as direct labor hours or production machine hours. As manufacturing becomes more sophisticated the...
Costs that have been used up or consumed. Expired costs are reported as expenses. (Costs that have not yet expired are reported as assets.)
Also referred to as factory burden, factory overhead, indirect manufacturing costs, and manufacturing support costs. To learn more, see Explanation of Manufacturing Overhead.
Costs that are common to several products, processes, activities, departments, territories, etc. Often common costs are subsequently allocated to each of the joint products, joint processes, etc. in order to determine...
Standard Costing For multiple-choice and true/false questions, simply press or click on what you think is the correct answer. For fill-in-the-blank questions, press or click on the blank space provided. If you have...
The combination of a manufacturer’s direct labor and factory overhead.
Direct materials, direct labor and manufacturing overhead costs. Also referred to as product costs, production costs, and inventoriable costs.
See job order cost sheet.
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...
Manufacturing Costs(Quick Test) Download PDF After you have answered all 40 questions, click "Grade This Quick Test" at the bottom of the page to view your grade and receive feedback on your answers. Note: Some of the...
A method of costing manufactured items that differs from normal costing and standard costing. Under actual costing each accounting period’s actual manufacturing overhead costs and each accounting period’s...
Cost that is considered to be part of the cost of merchandise. For a retailer, the inventoriable cost is the cost from the supplier plus all costs necessary to get the item into inventory and ready for sale, e.g....
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...
An assumption that determines the order in which costs should flow out of a balance sheet account (e.g. Inventory, Investments, Treasury Stock) when the item is sold. For an illustration of the cost flow assumption, see...
The actual cost of direct materials, the actual cost of direct labor, and manufacturing overhead applied by using a predetermined annual overhead rate.
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...
The cost transferred from one department to the next department in a process costing system.
A cost object is often a product or department for which costs are accumulated or measured. For example, a product is the cost object for direct materials, direct labor and manufacturing overhead. The factory maintenance...
The planned or expected costs. Often used in manufacturing for accounting for inventories and production. When actual costs differ from the standard costs, variances are reported.
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...
Usually refers to manufacturing overhead costs such as factory supplies, factory depreciation, indirect factory labor, etc. To learn more, see Explanation of Manufacturing Overhead.
The cost to hold an item in inventory. Includes the cost of capital tied up in inventory, the cost of space and insurance, and the cost of items becoming obsolete while being held in inventory. This is an important...
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...
An amount that should be charged to the current accounting period as an expense.
See Explanation of Standard Costing.
Usually a department within a company that is responsible for its costs but not revenues or profit.
See job order costing.
The cost accounting system where costs are recorded by individual job (versus process costing system). The job order system can use standard costs or actual costs.
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...
Assigning more manufacturing overhead to production than the amount that was actually incurred.
The cost of the next unit.
See direct costing.
A cost or expense that is not directly traceable to a department, product, activity, customer, etc. As a result indirect costs and expenses are often allocated to the department, product, etc. For example, a...
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