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...
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...
Reports too little. If an error understates the inventory and the company’s net income, the amount of inventory and the amount of net income being reported are less than the correct amounts.
The generally accepted accounting principles practiced in the United States.
Usually the difference between the cost of inventory at LIFO versus the cost of inventory at FIFO.
A commitment to purchase a specific number of items in the future at a fixed price. If the agreement is noncancelable, the company must report a loss when the current cost of the items falls below the contracted price.
Regression analysis with only one independent variable.
A decrease in the value of a long term asset to an amount that is less than the amount shown under the cost principle.
General rules upon which more-detailed, specific accounting rules and standards are based. To learn more, see Explanation of Accounting Principles.
See Financial Accounting Foundation.
See compound interest.
The Roman numeral that represents 1000. Other symbols that are sometimes used to represent 1000 include k and m. (Note: Sometimes M is also used to indicate million.)
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,...
Reports too much. If an error overstates the inventory and the company’s net income, the amount of inventory and the amount of net income being reported is more than the correct amount.
In the equation of a straight line, y = a + bx, ‘bx’ is the total variable cost resulting from the variable cost rate ‘b’ multiplied times the quantity ‘x’.
An employee’s pretax compensation that is based on annual or monthly amounts rather than an hourly rate. Management employees are usually paid salaries. To learn more, see Explanation of Payroll Accounting.
The activities involved in earning revenues. For example, the purchase or manufacturing of merchandise and the sale of the merchandise including marketing and administration. In the statement of cash flows the operating...
To assign or allocate on a logical basis. For example, the materials price variance in a standard costing system is prorated to the following categories: materials inventory, work-in-process inventory, finished goods...
A document issued to a customer by a seller which reduces the seller’s accounts receivable and its net sales. It also reduces the buyer’s accounts payable and net purchases. A document issued by a bank that...
Payroll taxes include 1) the taxes withheld from employees’ wages and salaries such as Social Security tax, Medicare tax, federal income tax, and state income tax, 2) the employers’ portion of the Social...
See cost-volume-profit (CVP).
Inventory that is less than the expected amount. It might be associated with theft or damage.
See economic order quantity (EOQ) model.
See net realizable value.
The number of years needed to recover the cash amount invested in a project. The calculation uses cash flows rather than accounting income flows. Generally the cash flows are not discounted to reflect the time value of...
The amount of an asset’s cost that will be depreciated. It is the cost minus the expected salvage value. For example, if equipment has a cost of $30,000 but is expected to have a salvage value of $3,000 then the...
The result of subtracting all variable expenses from revenues. It indicates the amount available from sales to cover the fixed expenses and profit.
See sales.
The situation where the number of units sold is not influenced by a change in selling price. In other words, a price increase does not have a corresponding decrease in the number of units sold.
A division or department of a business whose managers are responsible for both revenues and expenses.
A factory or manufacturing overhead rate used to allocate, apply, assign, or spread indirect product costs to items manufactured. Under traditional cost accounting, the burden rate might be a percentage of direct labor...
A diagram depicting a company’s hierarchy or chain of command, its business segments, functions, and departments.
The remainder or difference. In depreciation the residual value is the estimated scrap or salvage value at the end of the asset’s useful life. In the accounting equation, owner’s equity is considered to be...
See endowment fund.
That part of the accounting system which contains the balance sheet and income statement accounts used for recording transactions.
See limited liability company.
Also referred to as draws. These are a reduction of owner’s equity, but are not a business expense and they do not appear on the sole proprietorship’s income statement.
Scrap or waste that should have been avoided. In other words, abnormal spoilage is the amount that is over and above the normal amount that is expected in a production process.
The accounting or bookkeeping system that does not utilize computer software for entering transactions into journals and ledgers.
End of month.
Often a U-shaped arrangement of the various machines involved in manufacturing a product. This layout eliminates the need to move the item being manufactured from one area or department of the factory to another. In...
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