What is the effect on financial ratios when using LIFO instead of FIFO? Definition of Effect of LIFO Instead of FIFO During periods of significantly increasing costs, the LIFO cost flow assumption instead of the FIFO...
What is the effect on financial ratios when using LIFO instead of FIFO? Definition of Effect of LIFO Instead of FIFO During periods of significantly increasing costs, the LIFO cost flow assumption instead of the FIFO...
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...
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.
A term used with standard costs to report a difference between actual costs and standard costs. To learn more, see Explanation of Standard Costing.
The cost accounting system where costs are recorded by individual job (versus process costing system). The job order system can use standard costs or actual costs.
The planned or expected costs. Often used in manufacturing for accounting for inventories and production. When actual costs differ from the standard costs, variances are reported.
Why do companies use cost flow assumptions to cost their inventories? Cost flow assumptions are necessary because of inflation and the changing costs experienced by companies. If costs were completely stable, it...
this topic by reading our Inventory and Cost of Goods Sold (Explanation). 1. Under which inventory cost flow assumption is the cost of the most recent purchase matched first with sales revenues? FIFO Wrong. Under FIFO...
A technique for allocating costs to a product, service, customer, etc. The premise is that activities cause an organization to incur costs. Once the costs of the activities have been identified and each activity’s...
Is a manufacturer's product warranty part of its manufacturing overhead or is it part of its SG&A expense? The costs associated with a manufacturer’s product warranty are part of its selling expenses and...
Can I capitalize this year's R&D? Generally, R&D costs cannot be capitalized for U.S. financial statements according to the Statement of Financial Accounting Standards No. 2, Accounting for Research and...
premiums that have not expired as of the balance sheet date are reported in the account __________ Insurance. 9. Insurance premiums that have expired during the accounting period are reported in the account Insurance...
What is the traditional method used in cost accounting? Definition of Traditional Method in Cost Accounting The traditional method of cost accounting refers to the allocation of manufacturing overhead costs to the...
Why would the cost behavior change outside of the relevant range of activity? Cost behavior often changes outside of the relevant range of activity due to a change in the fixed costs. When volume increases to a certain...
or standard cost per pound The quantity variance identifies whether the actual quantity of the input used was more or less than the planned or standard quantity for the actual output The variance analysis of...
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 common process is known as the split-off point. The costs prior to the split-off point are known as the common costs. Since the value of the byproducts is usually insignificant, the accounting for the byproducts can...
Our Explanation of Standard Costing uses an easy-to-relate to example for illustrating a manufacturer's standard costs and variances. Also provided is a chart which indicates each variance, what it tells you, and where...
Inventory and Cost of Goods Sold (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (39) Marked Wrong (0) Marked Right (0) inventory This current asset reports a retailer’s or manufacturer’s...
costs. Select... assigned direct indirect 7. The salary of the manager of the factory maintenance department will be a direct cost to that department, and will be __________ __________ product cost. Select... a direct...
Our Explanation of Standard Costing uses an easy-to-relate to example for illustrating a manufacturer's standard costs and variances. Also provided is a chart which indicates each variance, what it tells you, and where...
stage of an ABC system usually assigns the accumulated costs in stage 1 to a product or service by using an activity cost __________. 8. Activity-based costing systems will use __________ cost drivers than a traditional...
Can absorption costing cause an increase in net income? Definition of Absorption Costing Absorption costing is a cost accounting method (required by US GAAP) in which a manufacturer must assign fixed manufacturing...
are then allocated by the activity that is causing the costs in each cost pool. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform...
What does it mean to amortize the premium, discount, and issue costs on bonds payable? Definition of Amortize Premium, Discount, and Issue Costs With regards to bonds payable, the term amortize means to systematically...
The first-in, first-out cost flow assumumption under the perpetual inventory system. The first (oldest) costs are the first costs removed from inventory at the time that goods are sold. The most recent costs will remain...
In activity-based costing this refers to the allocation of costs to activities. For example, allocating the costs of setting up the manufacturing equipment to run a batch of product to the activity “setup...
A method where only the variable manufacturing costs are assigned to inventory and the cost of goods sold. Fixed manufacturing costs are viewed as expenses of the period in which they are incurred. This method is not...
The last-in, first-out cost flow assumption under the perpetual inventory system. The last (most recent) costs as of the time that goods are sold are the first costs removed from inventory. The oldest costs as of the...
A cost that can be traced to a cost object. For example, the flour used in baking bread is a direct cost of a bakery’s bread. The wages and salaries of the employees working exclusively in a manufacturer’s...
and expenses. break-even point This is the number of units or the revenues needed by a company in order to cover both its 1) fixed costs and expenses, and 2) variable costs and expenses. Mark as wrong Mark as right cost...
What is cost behavior? Definition of Cost Behavior Cost behavior is an indicator of how a cost will change in total when there is a change in some activity. In cost accounting and managerial accounting, three types of...
Why does the fixed cost per unit change? Definition of Fixed Cost per Unit Fixed costs such as rent, salaries, depreciation, etc. generally do not change in total within a reasonable range of volume or activity. On the...
What is FIFO? Definition of FIFO In accounting, FIFO is the acronym for First-In, First-Out. It is a cost flow assumption usually associated with the valuation of inventory and the cost of goods sold. Under FIFO, the...
. These accountants do not include selling, administrative, or interest costs in their definition of the full cost of a product. Their view is consistent with the way that inventory and the cost of goods sold are...
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...
of the physical space occupied by the inventory including rent, depreciation, utility costs, insurance, taxes, etc. Cost of handling the items. Cost of deterioration and obsolescence. Often the costs are computed for a...
What is the contribution margin ratio? Definition of Contribution Margin Ratio The contribution margin ratio is the percentage of sales revenues, service revenues, or selling price remaining after subtracting all of the...
What is the cost of goods available? Definition of Cost of Goods Available For non-manufacturing companies using the periodic inventory system in its general ledger, the cost of goods available (COGA, or cost of goods...
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