The combination of a manufacturer’s direct labor and factory overhead.
The combination of a manufacturer’s direct labor and factory overhead.
Also referred to as factory burden, factory overhead, indirect manufacturing costs, and manufacturing support costs. To learn more, see Explanation of Manufacturing Overhead.
See fixed expenses.
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...
What are direct costs? Definition of Direct Costs Direct costs are directly traceable to a cost object such as a product or a department. In other words, direct costs do not have to be allocated to a product, department,...
The combination of direct materials and direct labor.
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...
and variable manufacturing __________ costs. 3. A manufacturer’s inventory classifications are raw materials,__________ __________ __________, and finished goods. 4. A manufacturer will have cost of goods __________...
In the EOQ model, order costs are the incremental costs of processing an order of goods from a supplier. Examples of order costs include the costs of preparing a requisition, a purchase order, and a receiving ticket,...
See indirect manufacturing costs.
What are semivariable costs? Definition of Semivariable Costs Semivariable costs are costs or expenses whose behavior is partially fixed and partially variable. That is, part of the total cost does not increase or...
R & D costs. These are costs incurred to develop new products or processes that may or may not result in commercially viable items. The general rule is that research and development costs are to be expensed...
See manufacturing costs.
In the EOQ model, the holding costs are the incremental costs of storing or holding an item in inventory for one year.
Costs that have been used up or consumed. Expired costs are reported as expenses. (Costs that have not yet expired are reported as assets.)
Assigning more manufacturing overhead to production than the amount that was actually incurred.
See mixed expenses.
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
The result of a corporation buying back its own bonds for an amount that is less than the carrying value of the bonds. The amount of the gain is computed by subtracting the amount spent to repurchase the bonds from the...
Do corporations issue both common stock and preferred stock? Some corporations issue both common stock and preferred stock. However, most corporations issue only common stock. In other words, it is necessary that a...
Why is the distinction between product costs and period costs important? The distinction between product costs and period costs is important to: Properly measure a company’s net income during the time specified on its...
as an asset and expensed later. To defer the cost to the balance sheet is to capitalize the costs. Examples of Costs Being Expensed Costs are reported as expenses in the accounting period when they are used up, have...
to the products or to the cost of inventory. The period costs are usually associated with the selling function of the business or its general administration. The period costs are reported as expenses in the accounting...
What is the difference between prime costs and conversion costs? Cost Categories of a Manufactured Product Prime costs and conversion costs pertain to the three cost categories of a manufactured product: Direct materials...
Why would someone buy a bond at a premium? Definition of Bond Premium Bond premium or premium on bonds occurs when the bond’s actual interest payments are greater than the interest payments expected by the market. The...
What is the effective interest rate for a bond? Definition of Effective Interest Rate of a Bond The effective interest rate of a bond is usually the market interest rate and the bond’s yield-to-maturity (as opposed to...
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 the stated interest rate of a bond payable? Definition of Stated Interest Rate of a Bond The stated interest rate of a bond payable is the annual interest rate that is printed on the face of the bond and stated...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
A bond without a stated interest rate. Because no interest is paid, the bond will sell for a discount from its maturity value. Rather than receiving interest, an investor’s compensation will be the difference...
How do you calculate the actual or real interest rate on a bond investment? Definition of Actual or Real Interest Rate on a Bond Investment The actual or real interest rate on a bond payable is also known as effective...
Why do bonds rarely sell for their maturity value? The reasons why bonds rarely sell for their maturity value are: The interest paid is usually fixed at the interest rate that is stated on the face of the bond. As a...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
What is yield to maturity? Definition of Yield to Maturity Yield to maturity is the total return that will be earned by someone who purchases a bond and holds it until its maturity date. The yield to maturity might also...
The total annual return on a bond investment if held to maturity. For example, if a bond is purchased at less than its maturity value, the yield to maturity includes the annual interest plus the gain as the bond...
burden, or burden. US GAAP requires that indirect manufacturing costs be allocated to, assigned to, or absorbed by the manufacturer’s output (in addition to the cost of direct materials and direct labor) for its...
What are out-of-pocket costs? Out-of-pocket costs are those costs or expenses that require a cash payment in the current period or during a project. For example, the wages of the person setting up a machine for a new...
What are nonmanufacturing overhead costs? Definition of Nonmanufacturing Overhead Costs Nonmanufacturing overhead costs are the business expenses that are outside of a company’s manufacturing operations. In other...
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