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...
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...
See incremental cost.
state that the products have __________ the manufacturing overhead costs. 3. The three main classifications of costs in the job cost records are direct __________, direct labor, and manufacturing overhead. 4. In...
causes of the overhead costs. Examples of Cost Allocations The following are only a few of the many cost allocations that occur in some companies or organizations: The cost of a manufacturing building is allocated to...
What is prime cost? Definition of Prime Cost In cost accounting, the prime cost of a manufactured product is the combination of the following: Direct materials cost Direct labor cost The indirect manufacturing costs...
An amount that should be charged to the current accounting period as an expense.
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...
See absorption costing.
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 cost transferred from one department to the next department in a process costing system.
Costing system wherein fixed manufacturing overhead is allocated to (or absorbed by) products being manufactured. This system, which treats fixed manufacturing costs as a product cost, is required for external financial...
of the following would not be included in a product's cost for inventory valuation for the financial statements? Factory Supplies Wrong. Factory supplies are included in manufacturing overhead. Quality Control...
increases when the volume decreases. Examples of Fixed Costs Assume the rent for a production facility is a fixed cost of $120,000 per year and there are normally 30,000 machine hours of good output during a year. At...
The cost accounting system where similar units are mass produced. Costs are collected by department and are then assigned to the units produced.
A corporation’s cost of capital is its weighted average after-tax cost of its debt, preferred stock, common stock, retained earnings, and other components of stockholders’ equity. The cost of capital is...
A past, historical cost. They are called sunk because a past cost cannot be changed and decisions involve only the present and the future.
See Explanation of Standard Costing.
The cost of the next unit.
What is marginal cost? Definition of Marginal Cost Marginal cost is a manufacturer’s cost to produce one more unit of product. In other words, marginal cost is the change in total costs when one additional unit is...
, or inflation-adjusted cost. Generally, the cost principle or historical cost principle requires that an asset should be reported at its cash or cash equivalent amount at the time of the transaction and should include...
What is the cost of capital? Definition of Cost of Capital The cost of capital is the weighted-average, after-tax cost of a corporation’s long-term debt, preferred stock (if any), and the stockholders’ equity...
What is cost accounting? Definition of Cost Accounting Cost accounting is involved with the following: Determining the costs of products, processes, projects, etc. in order to report the correct amounts on a company’s...
The actual cost of direct materials, the actual cost of direct labor, and manufacturing overhead applied by using a predetermined annual overhead rate.
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.
To learn more, see our Nonmanufacturing Overhead Outline.
Cost of goods sold is usually the largest expense on the income statement of a company selling products or goods. Cost of Goods Sold is a general ledger account under the perpetual inventory system. Under the periodic...
/sunk costs may help us determine the relevant current and future costs and potential income tax benefits. Example of a Sunk Cost Assume that a year ago a company spent $100,000 to purchase and install a new...
What is a deferred cost? Definition of Deferred Cost A deferred cost is a cost that is already recorded in a company’s accounts, but at least some of the cost should not be expensed until a future accounting period....
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...
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...
See job order cost sheet.
See direct costing.
, work-in-process, finished goods) and the cost of goods sold will contain the standard costs. (Think of the standard costs as the “should be” costs which are tied to the amounts in the company’s profit plan.) Any...
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...
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.
Usually a department within a company that is responsible for its costs but not revenues or profit.
For a merchandiser this is the cost of merchandise purchased after deducting purchase returns, purchase allowances, and purchase discounts but after adding freight-in.
What is cost incurred? Definition of Cost Incurred A cost incurred is a cost that a company (or other organization) becomes liable for. Example of Cost Incurred Assume that a retailer begins operations on December 1 and...
What is the cost principle? Definition of Cost Principle The cost principle is one of the basic underlying guidelines in accounting. It is also known as the historical cost principle. The cost principle requires that...
Featured Review
"After running my electrical contracting business for three decades, I attribute a significant portion of my financial acumen to the invaluable training provided by AccountingCoach. This premier site has been my go-to resource for accounting education, offering an extensive and comprehensible curriculum. What sets the PRO membership apart is its depth and breadth, providing advanced insights that are directly applicable to my business. The excellent explanations and materials on the site demystify complex accounting concepts, making them accessible and relevant to my industry. This program has not only fortified my understanding of financial intricacies but has also empowered me to make informed decisions, contributing substantially to the success and longevity of my business. AccountingCoach has been an indispensable companion throughout my entrepreneurial journey, and I highly recommend it to anyone seeking a robust foundation in accounting." - J.L.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: