In standard costing, how is the purchase price variance reclassified to arrive at actual cost? Definition of Purchase Price Variance In standard costing, the purchase price variance is the difference between the actual...
In standard costing, how is the purchase price variance reclassified to arrive at actual cost? Definition of Purchase Price Variance In standard costing, the purchase price variance is the difference between the actual...
Do variance accounts have an impact on financial statements? Or are they for performance evaluation only? Since the financial statements must reflect the cost principle, both the standard costs and the variances must be...
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...
overhead costs will involve a __________-and-effect relationship. 8. Instead of spreading manufacturing overhead costs on the basis of direct labor hours or production machine hours, a more sophisticated and logical...
analysis may include the following: There is an $8,000 unfavorable variance which needs to be analyzed The $8,000 variance can be separated into a price variance and a quantity variance The price variance identifies...
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...
What are indirect manufacturing costs? Definition of Indirect Manufacturing Costs Indirect manufacturing costs are a manufacturer’s production costs other than direct materials and direct labor. Indirect manufacturing...
What is a cost driver? Ideally, a cost driver is an activity that is the root cause of why a cost occurs. In the past century, the root cause of indirect manufacturing costs has changed from a single cost driver (such as...
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...
, direct labor, and manufacturing overhead. Since manufacturing overhead is an indirect cost, it is usually assigned or allocated through an overhead rate or burden rate. Two examples of an overhead or burden rate are 1)...
the standard cost per pound (or some other unit of measure such as gallons, liters, etc.) Variances direct management’s attention to areas where the company’s operations are deviating from the company’s budgets...
See direct materials usage variance.
See direct materials usage variance.
See direct materials usage variance. To learn more, see Explanation of Standard Costing.
. A manufacturer’s inventory consists of the cost to produce the items (the costs of direct materials, direct labor, and manufacturing overhead). Sometimes a company’s inventory cost has to be reduced to a lower...
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 term used in cost accounting to arrive at the cost per unit. The term is associated with the units that are not completed at the end of an accounting period. For example, if 500 units are completed as far as materials,...
What are conversion costs? Definition of Conversion Costs Conversion costs is a term used in cost accounting that represents the combination of direct labor costs and manufacturing overhead costs. In other words,...
What is the meaning of pro rata? Pro rata is a Latin term that means in proportion. Pro rata is related to prorate, a term used in cost accounting. To illustrate the term pro rata, let’s assume that a company’s...
Usually this refers to manufacturing employees who are not classified as direct labor. Material handlers, mechanics, setup workers, clean up workers are a few examples of indirect labor.
The combination of direct materials and direct labor.
equivalent unit of production under two cost flow assumptions: weighted-average and FIFO. Example of Equivalent Units of Production Assume that a manufacturer uses direct labor continuously in one of its production...
What is the difference between product costs and period costs? A manufacturer’s product costs are the direct materials, direct labor, and manufacturing overhead used in making its products. (Manufacturing overhead is...
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...
of direct and indirect manufacturing employees. If for the month of January the direct labor is $40,000, then $2,000 of the worker comp cost should be included as direct labor. If indirect labor for January is $60,000...
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 variable manufacturing costs other than direct materials and direct labor that have been assigned to the products manufactured via a predetermined rate. Ideally, by the end of the accounting year the amount applied...
A phrase used in standard costing. The production that is acceptable (not rejected products) and which is assigned manufacturing costs of direct materials, direct labor, and manufacturing overhead.
Direct materials, direct labor and manufacturing overhead costs. Also referred to as product costs, production costs, and inventoriable costs.
The actual cost incurred for manufacturing costs other than direct materials and direct labor which increase as production volume increases. Examples include manufacturing supplies and electricity to operate the...
Manufacturing costs other than direct materials and direct labor. To learn more about manufacturing overhead, see our Manufacturing Overhead Outline.
The actual cost of direct materials, the actual cost of direct labor, and manufacturing overhead applied by using a predetermined annual overhead rate.
How is the material usage variance account reported on the financial statements? Definition of Materials Usage Variance The materials usage variance (in a standard costing system) results from using more or less than the...
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...
of producing the furniture are indirect product costs, since they must be allocated to the furniture based on labor hours, machine hours, or some other activities. However, the indirect product costs could be direct...
The costs that should have occurred for the actual good output are known as standard costs, which are likely integrated with a manufacturer’s budgets, profit plan, master budget, etc. The standard costs involve the...
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...
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