year). For the next nine accounting years the depreciation expense will be $30,000 and then $15,000 in the final accounting year. If the machine is used by a manufacturer, the depreciation, electricity, and maintenance...
year). For the next nine accounting years the depreciation expense will be $30,000 and then $15,000 in the final accounting year. If the machine is used by a manufacturer, the depreciation, electricity, and maintenance...
that the common costs or indirect costs that require allocation are not caused by volume. In other words, traditional cost allocations are often based on something other than the root causes of the costs. It is possible...
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,...
manufacturing and increased demands from customers, direct labor is no longer the main cost driver of indirect manufacturing overhead. In addition to direct labor, today’s drivers of indirect manufacturing costs...
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...
classify and report their expenses on their internal income statements by the following functions: Manufacturing (further classified by production departments and factory service departments) Selling, general...
efficiency variance will result. If the materials required using more experienced labor, it is possible that a labor rate variance will also occur. The above situation can also extend to the overhead variances. If more...
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 term used by manufacturers to indicate that the manufacturing overhead applied or assigned to its production is greater than the amount actually incurred.
See fixed manufacturing overhead volume variance.
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 term used by manufacturers to indicate that its manufacturing overhead applied or assigned to its output is less than the amount actually incurred.
See fixed manufacturing overhead volume variance.
Direct materials, direct labor and manufacturing overhead costs. Also referred to as product costs, production costs, and inventoriable costs.
See direct labor efficiency variance and variable manufacturing overhead efficiency variance.
In cost accounting this term means to allocate, apply, apportion, or spread manufacturing overhead costs to the production output. In terms of accounts receivable, assign means to pledge accounts receivable to a lender...
Costing system wherein fixed manufacturing overhead is allocated to (or absorbed by) products being manufactured. This system, which treats fixed manufacturing costs as a product cost, is required for external financial...
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...
. Examples of Production Costs A manufacturer’s production costs consists of the costs for the following: Direct materials Direct labor Manufacturing overhead Join PRO to Track Progress Mark the Question as Read...
Cost that is considered to be part of the cost of merchandise. For a retailer, the inventoriable cost is the cost from the supplier plus all costs necessary to get the item into inventory and ready for sale, e.g....
What is prime cost? Definition of Prime Cost In cost accounting, the prime cost of a manufactured product is the combination of the following: Direct materials cost Direct labor cost The indirect manufacturing costs...
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...
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...
, and manufacturing overhead that are included in the products that moved from the manufacturing area to the finished goods inventory during the accounting period. The calculation is presented as a schedule or statement....
What is meant by the full cost of a product? Many (perhaps most) accountants use the term full cost to mean the full manufacturing or production cost of a product. To these accountants this means a product’s cost of...
classified into three groups: Raw materials used in the product Direct labor used to make the product Manufacturing overhead incurred to make the product Since the manufacturing overhead costs are indirect costs, they...
Are there two ABC methods in accounting? Some accountants use ABC to mean Activity Based Costing. Under this ABC a manufacturer will use many cost drivers to assign overhead costs to products. The objective of Activity...
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...
consist of the costs of direct materials, direct labor, and manufacturing overhead Examples of Inventoriable Costs Assume that a retailer purchases an item for resale by paying $20 to the supplier. The item is purchased...
Unscramble 8. This variance is associated with fixed manufacturing overhead. VOLUME VUOELM Unscramble VOLUME UOLVEM Unscramble 9. A budget that changes with the volume of good output is a ___________ budget. FLEXIBLE...
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...
, the resulting allocation is somewhat arbitrary. Because of the arbitrariness, some people describe cost allocation as the spreading of a cost. Accountants have made efforts to improve the cost allocation techniques....
with the costs of direct labor and manufacturing overhead) A prime cost The costs of direct materials are reported in the financial statements based on where they are: Raw materials not yet in production are...
$232,000. The result was a favorable SG&A expense budget variance of $8,000. Manufacturing overhead costs were budgeted to be $400,000 but were actually $393,000. The result was a favorable manufacturing overhead...
or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. Variable costing is also known as __________ costing. 2. Under variable costing, the...
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...
Is there a difference between work-in-process and work-in-progress? It depends on the user of the terms. Definition of Work-in-Process I use the term “work-in-process” to mean a manufacturer’s inventory that is not...
. In order for a company to avoid losses, it is important that the stock of goods in all locations (retail display area, warehouses, factory, etc.) be rotated. When the grocery store rotates its stock, the units are...
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