at the following costs: January: 500 units at $10 each May: 1,000 units at $11 each September: 1,000 units at $12 each Assume that throughout the year the company sold 2,300 units. As a result, the company had 200 units...
at the following costs: January: 500 units at $10 each May: 1,000 units at $11 each September: 1,000 units at $12 each Assume that throughout the year the company sold 2,300 units. As a result, the company had 200 units...
during their production processes. This shrinkage is also known as spoilage or waste and it can be either normal or abnormal. Example of Inventory Shrinkage Assume that a retailer’s computerized inventory records...
for its selling and general administration will be an expense for the period indicated by the meter reading dates. However, the utility bill for the direct and indirect manufacturing operations is part of its...
will have no profit. Example of Margin of Safety Let’s assume that a company currently sells 3,000 units of its only product. The company has estimated that its break-even point is 2,800 units. Therefore, the...
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...
to as the optimum lot size. The formula to calculate the economic order quantity (EOQ) is the square root of [(2 times the annual demand in units times the incremental cost to process an order) divided by (the...
the cost per unit. If there are 80 units in inventory at the end of the accounting period, the cost of the ending inventory and the cost of goods sold (using the periodic inventory system) are as follows: Amount from...
to calculate a retailer’s cost of goods sold is to begin with the cost of the goods it had purchased during the accounting period and then adjust it for the change in inventory. For example, if 1,000 units of a...
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...
A budget that flexes with volume. Under a flexible budget the budgeted amount of manufacturing overhead will increase if the company produces more units than planned. The flexible budget will decrease if the company...
The situation where the number of units sold is not influenced by a change in selling price. In other words, a price increase does not have a corresponding decrease in the number of units sold.
The cost accounting system where similar units are mass produced. Costs are collected by department and are then assigned to the units produced.
Sometimes referred to in the context of cost or expense behavior such as “variable expenses increase as volume increases.” In this context volume might be an activity such as the number of machine hours, the...
A graph’s horizontal base which indicates the total number of units or other units of volume or activity for the amounts indicated by the y-axis.
Our Explanation of Present Value of a Single Amount discusses the time value of money and the need to discount future amounts to the time of an investment or other transaction. The present value of 1 table is used to...
of a product’s direct materials. Expressed another way, conversion costs are the manufacturing or production costs necessary to convert raw materials into products. The term conversion costs often appears in the...
, 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...
of this material in order to pass the CPA Exam. States and jurisdictions have specific requirements that must be met before taking the CPA Exam. In the U.S. it is common for the requirements to include 150 college...
of a peripheral activity, such as a retailer selling one of its old delivery trucks. A gain occurs when the cash amount (or its equivalent) received is greater than the asset’s carrying amount, which is also referred...
Should a cash discount be recorded as a reduction to an expense? Yes, a cash discount should be a reduction to an expense. After all, accountants define cost as the cash amount (or cash equivalent amount) at the time of...
Used in the periodic inventory method to compute the value of inventory and the cost of goods sold. This average cost is based on the total cost of goods available for sale for the entire year (after all purchases for...
A method used by retailers to achieve the LIFO cost flow without tracking individual units. A further advantage is that pools of products are used. This will likely mean less liquidation of LIFO cost layers that would...
A predetermined dollar amount that one unit of a finished product should cost during an accounting period.
A predetermined dollar amount that a pound of material or an hour of labor should cost during an accounting period.
with a selling price of $12 a unit. SalesMax sends GoodCorp an invoice listing the items, the date shipped of June 15, and payment terms of 2/10, net 30. When GoodCorp receives the 100 units of product, it...
What is the break-even formula? Break-even Point in Units of Product The formula for determining the break-even point in units of product sold is: total fixed expenses divided by the contribution margin per unit. For...
year for 5 years. Download our Straight-line Method Form and Template. Units-of-Production Method Depreciable cost of $90,000 divided by 100,000 units = $0.90 per unit. In 2022, the company produces 12,000 units X $0.90...
What does it mean to check the extensions and to foot an invoice? To check the extensions on a purchase invoice means to verify that the number of units of each item multiplied by its unit cost agrees with the total...
Our Explanation of Present Value of a Single Amount discusses the time value of money and the need to discount future amounts to the time of an investment or other transaction. The present value of 1 table is used to...
Our Explanation of Present Value of an Ordinary Annuity uses the appropriate present value factors for discounting a stream of equal cash amounts occurring at equal time intervals. An important feature is the use of loan...
-even point in dollars of revenues is equal to the total of the fixed expenses divided by the contribution margin per unit. True Wrong. Fixed expenses divided by the contribution margin per unit is the break-even point...
supplier is unable to deliver additional units at the expected time. If the company is a manufacturer, a safety stock of materials could minimize the risk of production being disrupted. Of course there are additional...
to COGS and the oldest unit costs will remain in inventory. Weighted-average which calculates a weighted-average unit cost based on each and all of the units in the COGA and then applies those unit costs to both the...
Assume that a company’s total cost of producing 10,000 units of product is $50,000. When the company produces 10,001 units, the company’s total cost is $50,002. Therefore, the marginal cost of producing unit #10,001...
the contribution margin per unit. UNITS TNSUI Unscramble UNITS STINU Unscramble 6. When calculating a product's break-even point in dollars, the denominator is the contribution margin __________. RATIO TRAOI...
and maintenance employees in the manufacturing facilities electricity and gas used in the manufacturing facilities indirect factory supplies, and much more Because manufacturing overhead is an indirect cost, accountants...
in units sold for a year is: fixed expenses for the year divided by the contribution margin per unit of product. Examples of Break-even Point To illustrate the break-even point, let’s assume that a company’s fixed...
to increase the total amount of its fixed costs . Example of Relevant Range Let’s assume that a manufacturer’s monthly production volume is consistently between 10,000 to 13,000 units of product requiring between...
component and a variable component. Mark as wrong Mark as right break-even point in units This is the result of dividing a company’s fixed expenses for a period of time by the contribution margin per unit of product....
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