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 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...
capital expenditure projects are required and may not increase a company’s profits…think OSHA or environmental mandates Some of projects will provide cost savings through faster operations or reductions in manual...
, 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...
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,...
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...
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...
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...
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,...
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...
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...
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...
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 effective interest rate? Definition of Effective Interest Rate The effective interest rate is the true rate of interest earned. It can also mean the market interest rate, the yield to maturity, the discount...
What is a fringe benefit rate? Definition of Fringe Benefit Rate A fringe benefit rate is a percentage that results from dividing the cost of an employee’s fringe benefits by the wages paid to the employee for the...
What is a predetermined overhead rate? Definition of Predetermined Overhead Rate A predetermined overhead rate is often an annual rate used to assign or allocate indirect manufacturing costs to the goods it produces....
What is an implicit interest rate? Definition of Implicit Interest Rate An implicit interest rate is one that is not stated explicitly. Example of Implicit Interest Rate Assume that I lend you $4,623 and you agree to...
The combined federal and state income tax rate that applies to an additional amount of taxable income.
What is the internal rate of return? Definition of Internal Rate of Return The internal rate of return is the interest rate that will discount an investment’s future cash amounts to be equal to cash paid at the...
A single overhead rate for assigning all of the manufacturing production and service department costs to products. This rate is less accurate than departmental rates if a company manufactures a diverse group of...
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 spending variance.
See variable manufacturing overhead efficiency variance.
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.
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...
, direct labor, and manufacturing overhead that are based upon the per unit amounts in the company’s annual profit plan. 11. __________ budgeting focuses on the expenditures for fixed assets that will likely affect the...
What is a flexible budget variance? Definition of Flexible Budget and Flexible Budget Variance First, a flexible budget is a budget in which some amounts will increase or decrease when the level of activity changes. A...
in an account that normally has a debit balance, or a debit balance in an account that normally has a credit balance A credit entry, when a debit entry will not have parentheses An unfavorable variance in standard...
Are direct costs fixed and indirect costs variable? Direct Costs vs. Indirect Costs The terms direct costs and indirect costs could be referring to a product, a department, a machine, geographic market, etc. (which are...
What is the direct write-off method? Definition of Direct Write-off Method The direct write-off method is one of the two methods normally associated with reporting accounts receivable and bad debts expense. (The other...
Our Explanation of Nonmanufacturing Overhead provides examples of a manufacturer's expenses which are not considered to be costs of a product for financial reporting. However, they are operating expenses that will have...
direct materials, direct labor, and manufacturing overhead. Manufacturers are also required to consistently follow their selected cost flow assumption. Examples of Inventory Valuation Assume that a new company purchased...
Our Explanation of Payroll Accounting discusses the taxes and benefits which are withheld from employees' pay as well as the taxes and benefits that are expenses for the employers. Also provided are examples of the...
Is the installation labor for a new asset expensed or included in the cost of the asset? Accounting for Labor to Install Asset The definition of an asset’s cost is all costs that are necessary to get an asset in place...
variance accounts. For external financial reporting, the variances must be allocated to the inventories and the cost of goods sold. Definition of GAAP GAAP is the acronym for the phrase generally accepted accounting...
What is a plant-wide overhead rate? Definition of Plant-wide Overhead Rate A plant-wide overhead rate is often a single rate per hour or a percentage of some cost that is used to allocate or assign a company’s...
What is the stated interest rate of a bond payable? Definition of Stated Interest Rate of a Bond The stated interest rate of a bond payable is the annual interest rate that is printed on the face of the bond and stated...
The preferred method for systematically moving bond discount or premium from the balance sheet over to interest expense on the income statement over the life of the bond. This method is superior to the straight-line...
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