. These accountants do not include selling, administrative, or interest costs in their definition of the full cost of a product. Their view is consistent with the way that inventory and the cost of goods sold are...
. These accountants do not include selling, administrative, or interest costs in their definition of the full cost of a product. Their view is consistent with the way that inventory and the cost of goods sold are...
other than the costs of direct materials and direct labor. Hence, manufacturing overhead is referred to as an indirect cost. Generally accepted accounting principles require that a manufacturer’s inventory and the...
What is the cost of goods available? Definition of Cost of Goods Available For non-manufacturing companies using the periodic inventory system in its general ledger, the cost of goods available (COGA, or cost of goods...
. Select... a direct an indirect 8. The maintenance department’s wages will be __________ product cost. Select... a direct an indirect 9. The costs of the factory cafeteria will likely be allocated to other departments...
amounts are irrelevant for today’s decisions they may help the management accountant to understand how costs behave, which costs to examine, etc. Some past costs could also have an impact on income tax payments or...
Our Explanation of Activity Based Costing illustrates how manufacturing overhead costs for a product will differ when costs are allocated using only the number of machine hours, as opposed to being allocated using the...
, as well as its gross profit, net income, income tax payments, and more.) FIFO. This results in the oldest, lower costs as the first to flow out of inventory and becoming the cost of goods sold LIFO. This results in the...
What causes an unfavorable fixed overhead budget variance? An unfavorable fixed overhead budget variance results when the actual amount spent on fixed manufacturing overhead costs exceeds the budgeted amount. The fixed...
What is setup cost? Definition of Setup Cost In manufacturing, setup cost is the cost incurred to get equipment ready to process a different batch of goods. Hence, setup cost is regarded as a batch-level cost in activity...
costing system used by some manufacturers. In such a system, the cost variances direct attention to the difference between 1) the standard, predetermined and expected costs of the good output, and 2) the actual...
service department is responsible for its costs. Hence, the service departments are separate cost centers. The costs incurred by the service departments are considered to be indirect manufacturing costs that ultimately...
What is the difference between a cost center and a profit center? Definition of Cost Center A cost center is a subunit of a company that is responsible only for its costs. A few examples of cost centers are: Production...
Also referred to as illusory profits. Occurs because accountants use past costs rather than replacement costs. For example, in computing the cost of goods sold accountants often use the FIFO cost flow assumption. This...
How much of the contribution margin is profit on units sold in excess of the break-even point? After the break-even point is reached, the entire contribution margin on the next units sold will be profit…provided the...
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...
Inventory and Cost of Goods Sold Inventory Inventory is usually the most significant current asset of a retailer or manufacturer. Generally, inventory is reported on the balance sheet at its cost (or lower). When the...
Our Explanation of Activity Based Costing illustrates how manufacturing overhead costs for a product will differ when costs are allocated using only the number of machine hours, as opposed to being allocated using the...
the costs of products are likely to change during an accounting year (seems there is always some inflation), a company must select a cost flow assumption that will be used consistently. Examples of cost flow assumptions...
What is opportunity cost? Definition of Opportunity Cost Opportunity cost is the profit that was lost or missed because of some action or failure to take some action. Some refer to opportunity cost as opportunity lost....
/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...
How do I compute the product cost per unit? Definition of Product Cost per Unit In accounting, a product’s cost is defined as the direct material, direct labor, and manufacturing overhead. Other costs such as...
. Mark as wrong Mark as right necessary costs These costs are included in the cost of a plant asset. An example is the installation cost of a new plant asset. (On the other hand, a cost that is the result of negligent...
for inventory valuation purposes.) 6. Manufacturing overhead must be assigned to both work-in-process inventory and finished goods inventory for external financial reporting purposes. True Right! False Wrong. 7. Only...
Cost that is considered to be part of the cost of merchandise. For a retailer, the inventoriable cost is the cost from the supplier plus all costs necessary to get the item into inventory and ready for sale, e.g....
, 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 sales? Definition of Cost of Sales Cost of sales is often a line shown on a manufacturer’s or retailer’s income statement instead of cost of goods sold. The cost of sales for a manufacturer is the...
See absorption costing.
This phrase has two connotations. One is the cost of holding inventory. In this case the carrying cost is the cost of capital tied up in inventory, the cost of storage, insurance, and obsolescence. Often this is...
The next best benefit foregone. The opportunity lost. Often measured as the contribution margin given up by not doing an activity. For example, if a sole proprietor is foregoing a salary and benefits of $50,000 at...
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....
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...
In manufacturing, the product cost includes direct materials, direct labor, and manufacturing overhead. A retailer’s product cost is the net cost from suppliers plus costs to get the product in place and ready for...
The cost of the next unit.
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...
A cost associated with a batch of items, but not directly traceable to an individual item within the batch. For example, the cost to set up a machine to run a batch of 5,000 items is a batch-level cost. This cost must...
of Indirect Costs For example, the depreciation of a company’s manufacturing building is an indirect cost of the following: The manufacturing departments within the building The products that are manufactured in the...
The cost of repairing or replacing previously sold products during their warranty periods.
See incremental cost.
as __________ direct labor. 3. A manufactured product has three inventoriable costs: direct materials, direct labor, and manufacturing or factory __________ overhead. 4. The term associated with estimated, predetermined...
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