Our Explanation of Standard Costing uses an easy-to-relate to example for illustrating a manufacturer's standard costs and variances. Also provided is a chart which indicates each variance, what it tells you, and where...
Our Explanation of Standard Costing uses an easy-to-relate to example for illustrating a manufacturer's standard costs and variances. Also provided is a chart which indicates each variance, what it tells you, and where...
This is the sum of the beginning inventory of merchandise plus the net cost of the merchandise purchased including freight-in.
, if the worker comp premiums are $5 per $100 of factory labor cost, then the worker comp premiums will be variable with respect to the dollars of factory labor cost. If the units of output in the factory correlate...
Our Explanation of Present Value of an Ordinary Annuity uses the appropriate present value factors for discounting a stream of equal cash amounts occurring at equal time intervals. An important feature is the use of loan...
of the typical observations is referred to as an __________. 3. __________ regression analysis involves only one independent variable. 4. A cost that is partly fixed and partly variable is referred to as a mixed or...
Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. Sales minus variable costs equals the __________ margin. 2. The sales in excess of the amount of sales...
Our Explanation of Inventory and Cost of Goods Sold will take your understanding to a new level. You will see how the income statement and balance sheet amounts are affected by the various inventory systems and cost flow...
for costs. Examples of cost centers include a production department, maintenance department, accounting department, human resource department, etc. Profit centers. In a profit center the manager is responsible for its...
What is a plant-wide overhead rate? Definition of Plant-wide Overhead Rate A plant-wide overhead rate is often a single rate per hour or a percentage of some cost that is used to allocate or assign a company’s...
What does the cost principle mean for a company's income statement? If a company has buildings, equipment and inventory, the cost principle will mean that the amount of depreciation expense and the cost of goods...
What is Construction Work-in-Progress? Definition of Construction Work-in-Progress Construction Work-in-Progress is a noncurrent asset account in which the costs of constructing long-term, fixed assets are recorded. The...
Are there two ABC methods in accounting? Some accountants use ABC to mean Activity Based Costing. Under this ABC a manufacturer will use many cost drivers to assign overhead costs to products. The objective of Activity...
income statement. A few examples include advertising, office salaries, interest on most loans, and research and development costs. When a cost has a future economic benefit which can be measured, the accountant should...
cost is more likely to be used. Knowing how costs behave is important for decision making. For example, a manufacturer will want to know how its costs will increase if a new product line is added (or how costs could...
of fixed manufacturing overhead costs The amount of the fixed manufacturing overhead costs that were assigned to (or absorbed by) the company’s good output Example of Production Volume Variance Assume that a...
principle, the cost flow assumption, consistency, and other accounting concepts and principles. When a company elects the LIFO cost flow assumption, it chooses to put its most recent costs in the cost of goods sold, and...
in the most recent higher costs being reported in the cost of goods sold resulting in less gross profit, less net income, less taxable income, and less income taxes than FIFO. LIFO also means that the older lower costs...
useful tool when measuring a manager’s efficiency. Example of a Flexible Budget Let’s assume a company determines that its cost of electricity and supplies will vary by approximately $10 for each machine hour (MH)...
, and/or Planned amounts that will be spent for future additions to property, plant and equipment When the depreciable assets that are included in capex are put into service, their costs will be depreciated over the...
sales. The cost of goods sold will consist of both fixed and variable product costs. However, selling, general and administrative expenses (SG&A) are not part of the cost of goods sold. Definition of Contribution...
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...
What does an unfavorable volume variance indicate? An unfavorable volume variance indicates that the amount of fixed manufacturing overhead costs applied (or assigned) to the manufacturer’s output was less than the...
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...
the wages and fringe benefits of the direct labor employees and the cost of the temporary staff that are working directly on the manufacturer’s products. The direct labor cost is classified as the following: A product...
in Manufacturing At a manufacturing company, the salaries and wages of employees in the manufacturing operations are assigned to the products manufactured. When the products are sold, the costs assigned to those...
. If that amount is significant, the company will prorate the $400,000 to its inventory and to its cost of goods sold. Let’s also assume that the proration will be based on the company’s $1 million of standard...
are not acceptable, management can make the needed changes before the year actually begins. Budgets can also assist in controlling the actual costs, because managers realize that the costs of their activities will be...
What is a deferred asset? Definition of Deferred Asset A deferred asset represents costs that have occurred, but because of certain circumstances the costs will be reported as expenses at a later time. You might consider...
What is a burden rate in inventory? I assume that the burden rate in inventory refers to a manufacturer’s indirect manufacturing costs, which are also referred to as factory overhead, indirect production costs, and...
a company’s costs, assisting in financial decisions, profit planning, calculating break-even points, capital budgeting, and calculating the costs of existing products in order to value the company’s inventory and to...
What increases a break-even point? Definition of Break-even Point The break-even point is the volume of sales in units or in dollars that is equal to a company’s total expenses (including the cost of goods sold). In...
Our Explanation of Manufacturing Overhead gives you examples of what is included in manufacturing overhead. You will learn that these are indirect product costs and therefore are allocated to the products in order to...
Our Explanation of Inventory and Cost of Goods Sold will take your understanding to a new level. You will see how the income statement and balance sheet amounts are affected by the various inventory systems and cost flow...
the largest expense on the income statement of a retailer or manufacturer. Since the amount is very significant it is important that the proper costs are matched with the sales revenues. On the internal financial...
. Example of a Revenue Accrual The accrual of revenues or a revenue accrual refers to the reporting of revenue and the related asset in the period in which they are earned, and which is prior to processing a sales...
overhead rates is that manufacturers are likely to produce many diverse products which use different processes in different departments and each has different costs. Example of Departmental Overhead Rates Assume that a...
A single overhead rate for assigning all of the manufacturing production and service department costs to products. This rate is less accurate than departmental rates if a company manufactures a diverse group of...
To assign costs to a product, department, customer, etc. on an arbitrary basis. For example, the heating cost might be allocated to the five departments located in the area that is heated. The allocation is often based...
An allocation of indirect costs based on the units of production, the number of machine hours, the number of labor hours, etc.
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