What is a deferred asset? Definition of Deferred Asset A deferred asset represents costs that have occurred, but because of certain circumstances the costs will be reported as expenses at a later time. You might consider...
What is a deferred asset? Definition of Deferred Asset A deferred asset represents costs that have occurred, but because of certain circumstances the costs will be reported as expenses at a later time. You might consider...
in Manufacturing At a manufacturing company, the salaries and wages of employees in the manufacturing operations are assigned to the products manufactured. When the products are sold, the costs assigned to those...
Under the accrual method of accounting, this account reports the amount of worker compensation insurance expense that pertains to the period indicated in the heading of the income statement, whether or not the company...
What is a burden rate in inventory? I assume that the burden rate in inventory refers to a manufacturer’s indirect manufacturing costs, which are also referred to as factory overhead, indirect production costs, and...
. If that amount is significant, the company will prorate the $400,000 to its inventory and to its cost of goods sold. Let’s also assume that the proration will be based on the company’s $1 million of standard...
are not acceptable, management can make the needed changes before the year actually begins. Budgets can also assist in controlling the actual costs, because managers realize that the costs of their activities will be...
the wages and fringe benefits of the direct labor employees and the cost of the temporary staff that are working directly on the manufacturer’s products. The direct labor cost is classified as the following: A product...
a company’s costs, assisting in financial decisions, profit planning, calculating break-even points, capital budgeting, and calculating the costs of existing products in order to value the company’s inventory and to...
Our Explanation of Inventory and Cost of Goods Sold will take your understanding to a new level. You will see how the income statement and balance sheet amounts are affected by the various inventory systems and cost flow...
the largest expense on the income statement of a retailer or manufacturer. Since the amount is very significant it is important that the proper costs are matched with the sales revenues. On the internal financial...
overhead rates is that manufacturers are likely to produce many diverse products which use different processes in different departments and each has different costs. Example of Departmental Overhead Rates Assume that a...
Our Explanation of Future Value of a Single Amount will show you the power of compounded interest on a single deposit. You will see how the future value tables can be useful as well as the rule of 72.
The amount of temporary staffing costs that were used during the time interval indicated in the heading of the income statement.
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 indirect manufacturing costs actually incurred during an accounting period.
A plotting of points that represent both the volume and the associated cost. The y-axis indicates the amount of costs while the x-axis indicates the corresponding volumes.
The actual cost incurred for manufacturing costs other than direct materials and direct labor which increase as production volume increases. Examples include manufacturing supplies and electricity to operate the...
Long term assets that are not classified as investments, property, plant, equipment, or intangible assets. An example is bond issue costs that are amortized to expense over the life of the bonds.
A technique using simultaneous equations to allocate a manufacturer’s service departments’ costs to both other service departments and to production departments.
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...
A decentralized division of a corporation which is responsible for and has control over its costs, revenues, and investments.
This ratio relates the costs in inventory to the cost of the goods sold. To learn more about this ratio, see Explanation of Financial Ratios.
Activities that are not specifically associated with a specific product or customer. For example, the costs of an audit and filing information with government agencies are examples of organization-sustaining activities.
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...
Selling price per unit minus variable costs per unit, or revenues per unit minus expenses per unit.
The variable manufacturing costs other than direct materials and direct labor that have been assigned to the products manufactured via a predetermined rate. Ideally, by the end of the accounting year the amount applied...
Assigning manufacturing overhead costs to products being manufactured by using a manufacturing overhead rate.
The estimated volume in a future period that will be used for allocating indirect manufacturing costs.
A method used in allocating the costs of manufacturing service departments (factory administration, maintenance, etc.) directly to the producing departments in the factory. Under this method, no service department cost...
Manufacturing costs other than direct materials and direct labor. To learn more about manufacturing overhead, see our Manufacturing Overhead Outline.
The benefit foregone by choosing another course of action. Also known as the opportunity cost. The lost opportunity is sometimes measured by the lost contribution margin (sales minus the related variable costs).
To assign costs to a product, department, customer, etc. on an arbitrary basis. For example, the heating cost might be allocated to the five departments located in the area that is heated. The allocation is often based...
An allocation of indirect costs based on the units of production, the number of machine hours, the number of labor hours, etc.
An amount that is expensed immediately. For example, routine repair costs on equipment are revenue expenditures because they are charged directly to an income statement account such as Repairs and Maintenance Expense.
What is inventory valuation? Definition of Inventory Valuation In the U.S., inventory valuation is the dollar amount associated with the items remaining in a company’s inventory. Generally speaking, the amount is the...
report what the costs should have been (the standard cost). This means that the debit or credit balance in the Materials Usage Variance account must be included in the external financial statements. If the standard...
production quantity, the cost to order is replaced by the costs related to __________ __________ a machine for a production run. 7. MRP is the acronym for materials __________planning. 8. Since the EOQ is the square...
than the current cost of the productive capacity being used up each year. Similarly, if a retailer’s cost of items in inventory is increasing at an annual rate of 10%, the cost of goods sold reported on the income...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
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