See direct materials usage variance.
See direct materials usage variance.
A variance arising in a standard costing system that indicates the difference between the actual cost of direct materials and the standard cost of direct materials. Recognizing this variance at the time the direct...
Is a favorable variance always an indicator of efficiency in operation? In a standard costing system, some favorable variances are not indicators of efficiency in operations. For example, the materials price variance,...
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...
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...
occurred throughout the year, the variance should be assigned to the raw materials inventory, work-in-process inventory, finished goods inventory, and cost of goods sold based on the quantity of the raw materials in...
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...
labor? ABC Wrong. ABC is the most favorable basis for allocating a variety of services provided by indirect labor. Direct Labor Hours Right! Machine Hours Wrong. Since the equipment is automated, direct labor hours...
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)...
See direct materials usage variance.
See direct materials price variance.
See direct materials usage variance. To learn more, see Explanation of Standard Costing.
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...
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,...
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...
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...
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...
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.
Direct materials, direct labor and manufacturing overhead costs. Also referred to as product costs, production costs, and inventoriable costs.
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.
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...
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...
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...
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...
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...
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...
Featured Review
"I've been a lifetime member for quite awhile now. This site is like having my college textbooks on hand, and it has helped me through multiple career paths: from Assistant Controller, to Controller, to Accounting Director, and now into Public Accounting. If ever I am stumped this is my first go to for why, how, and what to do. It is a tremendous help. Honestly, I find it much better than searching through my textbooks, and it is always up to date. Keep up the great work on this site and this wonderful resource." - Lorraine H.
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: