See fixed manufacturing overhead volume variance.
See fixed manufacturing overhead volume variance.
The difference between the actual amount and the budgeted amount.
What is a budget variance? A budget variance results when an actual amount is different from a planned or budgeted amount. A budget variance can occur for revenues and for expenses. Join PRO to Track Progress Mark the...
Accounting reports that identify the differences between standard costs and actual costs, between budget amounts and actual amounts, etc.
See Explanation of Standard Costing.
The amount by which actual costs exceed the standard costs or budgeted costs. Also, the amount by which actual revenues are less than the budgeted revenues.
See fixed manufacturing overhead volume variance.
See variable manufacturing overhead spending variance and fixed manufacturing overhead budget variance. To learn more, see Explanation of Standard Costing.
A difference between an actual cost and a budgeted or standard cost, and the actual cost is the lesser amount. In the case of revenues, a favorable variance occurs when the actual revenues are greater than the budgeted...
Is depreciation a direct or indirect cost? Definition of Depreciation Depreciation is defined as the systematic expensing of the cost of an asset such as equipment, building, vehicle, etc. over the useful life of the...
A method for recognizing bad debts expense arising from credit sales. Under this method there is no allowance account. Rather, an account receivable is written-off directly to expense only after the account is determined...
, the process costing system is more appropriate.) Process Costing Process costing is a cost accounting system for calculating the manufacturing costs (direct materials, direct labor and manufacturing overhead) of...
What is the meaning of a favorable budget variance? Definition of a Favorable Budget Variance A favorable budget variance means that the actual amount that occurred was better for the company (or organization) than the...
What is the production volume variance? Definition of Production Volume Variance The production volume variance is associated with a standard costing system used by some manufacturers. This variance arises when there is...
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...
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...
The quantity on hand that will trigger an order to buy more items. A company’s reorder point for Product X might be 80 units. When the quantity on hand gets down to 80, a purchase order is prepared to obtain more...
, the company’s will be reported as shown here: Revenues variance: ($1,500). The amount is a negative or unfavorable variance because the actual revenues were $28,500 instead of the budgeted revenues of $30,000. The...
These are the inventoriable costs and include a product’s direct materials, direct labor, and manufacturing overhead. manufacturing costs (or) production costs These are the inventoriable costs and include a...
costs; what the costs should be) the company is on track to reach the cost part of its profit plan. If the actual costs deviate from the standard costs, management is alerted by the variances that are reported for...
What is the weakness of traditional cost allocations? Traditional cost allocations are often based on volume such as number of products manufactured, number of direct labor hours, number of production machine hours,...
are sold, the costs of the products (raw materials, direct labor, and factory overhead) will be expensed as the cost of goods sold. Until the products are sold, the products’ costs will be reported as the current...
materials and direct labor) will be part of the cost of the items in inventory and the cost of the items sold. Accountants refer to this as full absorption costing. Accountants will also say that the manufactured goods...
as the subsidiary ledger containing the details for the general ledger account Work in Process. The Work in Process account will now be a control account containing summary amounts for direct materials, direct labor,...
because U.S. accounting principles and income tax regulations require manufacturers to follow full absorption costing. This means that the cost of manufactured goods must include the costs of the direct materials,...
and general management, are expenses of the accounting period and are not applied or assigned to products.) Actual overhead are the manufacturing costs other than direct materials and direct labor. Since the overhead...
for each item (or each job or special order). The job cost record will report each item’s direct materials and direct labor that were actually used and an assigned amount of manufacturing overhead. The job cost...
costs (which are direct materials, direct labor, and manufacturing overhead). Nonmanufacturing overhead costs are the company’s selling, general and administrative (SG&A) expenses plus the company’s interest...
statement as the cost of goods sold. Product costs are also referred to as inventoriable costs. Examples of Product Costs The product costs for a retailer will be the amount paid to the supplier plus any freight-in....
What is the reorder point? Definition of Reorder Point The reorder point is the quantity of units in inventory at which time an order should be placed to purchase additional units. The reorder point is calculated by...
or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. The time between the placing of an order and the receipt of the goods that were ordered is...
to store inventory will be relatively low. Another company with little cash, much debt, and little available storage space will have relatively high costs of storing inventory. The costs to store inventory are part of...
What is safety stock? Definition of Safety Stock Safety stock is an additional quantity of an item held by a company in inventory in order to reduce the risk that the item will be out of stock. Safety stock acts as a...
What is EOQ? Definition of EOQ EOQ is the acronym for economic order quantity. The economic order quantity is the optimum quantity of an item to be purchased at one time in order to minimize the combined annual costs of...
Also referred to as the fixed overhead spending variance. The difference between the actual fixed overhead incurred and the amount of fixed overhead that had been budgeted.
See variable manufacturing overhead spending variance.
A variance arising in a standard costing system that indicates the difference between the actual amount of fixed manufacturing overhead incurred and the budgeted amount of fixed manufacturing overhead. To learn more, see...
Also referred to as the fixed overhead budget variance. The difference between the actual fixed overhead incurred and the amount of fixed overhead that had been budgeted.
See variable manufacturing overhead efficiency variance.
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