What is the reorder point? Definition of Reorder Point The reorder point is the quantity of units in inventory at which time an order should be placed to purchase additional units. The reorder point is calculated by...
What is the reorder point? Definition of Reorder Point The reorder point is the quantity of units in inventory at which time an order should be placed to purchase additional units. The reorder point is calculated by...
are considered to be liquidity ratios: Current ratio Quick ratio or acid test ratio The amount of a company’s working capital is also cited as an indicator of liquidity. However, a company with a large amount of...
of its current liabilities in the calculation of the company’s quick ratio. Examples of Quick Assets Common examples of quick assets include: Cash and cash equivalents Temporary marketable securities Accounts...
). The quick ratio differs from the current ratio in that some current assets are excluded from the quick ratio. The most significant current asset that is excluded is inventory. The reason is that inventory might not be...
produced. In other words, the utility bill will be clinging to the units produced. Some of the utility cost will be clinging to the units in inventory and therefore will be part of the cost of the asset inventory. Some...
Under the accrual method of accounting, this account reports the amount of worker compensation insurance expense that pertains to the period indicated in the heading of the income statement, whether or not the company...
What is the earnings per share (EPS) ratio? Definition of Earnings per Share The earnings per share ratio, or simply earnings per share, or EPS, is a corporation’s 1) net income (or earnings) after tax that is...
in a year, each semimonthly pay period will have on average 2.16667 weeks per semimonthly payday. Example of Biweekly Payroll Let’s assume that a company pays its employees biweekly on every other Friday. If a new...
What GPA is needed to be hired by a CPA firm? There is no single GPA (grade point average) that assures you of being hired by a CPA firm. I have seen firms pass over a student with a near-perfect GPA (3.97 out of 4.0)...
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...
Should a manufacturer's selling prices be based on costs? A manufacturer’s selling prices should not be based on costs alone. One reason is that the actual cost of each product is not known with precision. At...
run smoothly with the same amount of monthly fixed costs, which on average are approximately $200,000 per month for the cost of supervisors, rent, depreciation, and other fixed costs. However, if the manufacturer’s...
’ equity section of the balance sheet. The weighted-average number of shares of common stock outstanding during the year is used to compute the corporation’s earnings per share often shown at the bottom of the...
of product will be an average of $20 ($40,000 divided by 2,000 units). The reason for the relatively small incremental cost per unit is due to the cost behavior of certain costs. For example, when the 2,000 additional...
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
of a publicly traded corporation. It uses the weighted average number of shares of common stock outstanding. earnings per share (or) EPS This amount is required to appear on the income statement of a publicly traded...
. True Wrong. SG&A and interest expenses are not allocated to inventories for financial reporting under generally accepted accounting principles. (Management might allocate these expenses internally to assist in...
receivable This procedure sorts the amounts owed to a company by its customers and by the dates when the sales invoices are or were due. Mark as wrong Mark as right average collection period (or) days' sales in...
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
companies have multiple inventory turnovers each year, small balances in the variance accounts (for whatever reason) are generally combined with the standard amount of the cost of goods sold. Significant variances which...
Can absorption costing cause an increase in net income? Definition of Absorption Costing Absorption costing is a cost accounting method (required by US GAAP) in which a manufacturer must assign fixed manufacturing...
In the EOQ model, the holding costs are the incremental costs of storing or holding an item in inventory for one year.
A cost flow assumption where the first (oldest) costs are assumed to flow out first. This means the latest (recent) costs remain on hand. To learn more, see Explanation of Inventory and Cost of Goods Sold.
Payables arising from the purchase of merchandise inventory and outside services. See accounts payable.
A business that sells goods from inventory. The business could be a retailer, wholesaler, distributor, manufacturer, etc.
The shipping cost to be paid by the buyer of merchandise purchased when the terms are FOB shipping point. Freight-in is considered to be part of the cost of the merchandise and should be included in inventory if the...
This is a record on an individual job (product, batch) within the job costing system. For items in process this is a subsidiary record to the general ledger account inventory: work-in-process (WIP).
In some countries turnover refers to sales. Turnover is also associated with some financial ratios such as the inventory turnover ratio, the accounts receivable turnover ratio, and asset turnover ratio.
The reduction of an asset’s carrying amount. For example, we often reduce or write down inventory from its cost to its net realizable value when the net realizable value is lower.
A method used by retailers for estimating the cost of ending inventory without tracking the individual units of product.
The optimum purchase (or production) quantity which minimizes the combined total cost of carrying inventory and processing additional purchase orders (or production setups).
A reduction in the cost of goods purchased that is allowed by the supplier based on the authorized return of goods. Also a general ledger account in which the purchase returns are recorded under the periodic inventory...
An additional quantity of items held in inventory in order to minimize the chance of an item being out of stock.
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 flow assumption where the last (recent) costs are assumed to flow out of the asset account first. This means the first (oldest) costs remain on hand. To learn more, see Explanation of Inventory and Cost of Goods...
A parody of FIFO used to describe a very slow-moving item in inventory.
This is the sum of the beginning inventory of merchandise plus the net cost of the merchandise purchased including freight-in.
A reduction in the cost of goods purchased that is granted by a supplier without the physical return of the goods. Also a general ledger account in which the purchase allowances are recorded under the periodic inventory...
In estimating the ending inventory under the retail method the cost ratio is the cost of goods available divided by the retail value of the goods available.
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