that the fixed manufacturing overhead costs remain at $600,000 but the company decides to manufacture 120,000 units (even though sales are expected to be only 100,000 units). In this situation, the fixed manufacturing...
that the fixed manufacturing overhead costs remain at $600,000 but the company decides to manufacture 120,000 units (even though sales are expected to be only 100,000 units). In this situation, the fixed manufacturing...
What does per annum mean? Definition of Per Annum Per annum means yearly or annually. It is a common phrase used to describe an interest rate. Often “per annum” is omitted, as in “I have a 4% mortgage loan.” or...
Also referred to as the current interest rate, the yield-to-maturity, and the effective interest rate. The market interest rate is always changing whereas the stated interest rate does not change.
What is burn rate? In business, burn rate is usually the monthly amount of cash spent in the early years of a start-up business. Burn rate is an important metric since the new business must spend time and money...
What is hurdle rate? Definition of Hurdle Rate In capital budgeting, the term hurdle rate is the minimum rate that a company wants to earn when investing in a project. Therefore, the hurdle rate is also referred to as...
An indicator of profitability that is measured by dividing the accounting net income by the amount invested.
See contractual interest rate.
The interest rate stated on a bond. This is also referred to as the face interest rate, nominal interest rate, and coupon rate.
A factory or manufacturing overhead rate used to allocate, apply, assign, or spread indirect product costs to items manufactured. Under traditional cost accounting, the burden rate might be a percentage of direct labor...
The stated interest rate appearing on the face of the bond. Also referred to as the nominal rate or the stated interest rate.
Rates based on a department’s direct and indirect overhead costs and some measure of the department’s activity, such as the department’s machine hours. Departmental rates are more accurate than...
An interest rate that is not explicitly stated. For example, instead of paying $100 cash a person is allowed to pay $9 per month for 12 months. The interest rate is not stated, but the implicit rate can be determined by...
In accounting this is the rate used to discount future cash flows in order to determine their present value.
See direct labor rate variance.
The rate that will discount all cash flows to a net present value of zero.
A target rate. For example, companies may decide to invest only in projects that generate an internal rate of return that is in excess of 12%. The 12% figure becomes the hurdle rate.
The amount by which total costs will change when an activity is increased by one unit. In the equation of the line, y = a + bx, the variable cost rate is represented by ‘b’ and the units of activity are...
See yield to maturity.
A percentage of an hourly wage rate (or salary) that represents the employer’s additional costs of employee benefits such as paid vacation days, paid sick days, insurance (health, dental, life, worker...
Usually an annual manufacturing overhead rate established just prior to an accounting year and based on budgeted amounts.
A term used in evaluating business investments. It represents the targeted rate that a company needs to earn. It is also referred to as the discount rate, because this rate is used to discount the future cash flows to...
See hurdle rate.
stock is issued its market value is likely to change in the opposite direction of inflation. The higher the rate of inflation, the less valuable are the fixed dividend amounts. If the inflation rate declines, the value...
, it is common for half of the annual amount to be paid at the end of each 6-month period (semiannually). Generally, a bond’s stated interest rate is fixed (does not change) for the life of the bond. As a result, the...
, depreciation, etc.) for the upcoming year. During that year, it expects to have 30,000 production machine hours of good output. Based on this, the manufacturer established a predetermined fixed manufacturing overhead...
Federal government securities with a fixed interest rate and maturing in 10 years or less.
Federal government securities with a fixed interest rate and maturing in more than 10 years.
is helpful in determining the two components of a mixed cost (also known as semivariable cost): The amount that is fixed or constant The variable rate (the rate by which the total cost changes when there is one...
Typically the stated interest rate will not change and is therefore considered to be a fixed rate. This will result in the semiannual interest payments being the same amount. The formula for the semiannual interest...
Why do bonds rarely sell for their maturity value? The reasons why bonds rarely sell for their maturity value are: The interest paid is usually fixed at the interest rate that is stated on the face of the bond. As a...
, production or other activity. Mark as wrong Mark as right variable costs (or) variable expenses These costs or expenses will vary in total as the level of activity changes because the rate per unit is constant or...
. For example, if the business has total fixed expenses of $300,000 for a year and it has a contribution margin of $40 per billable hour (hourly billing rate of $100 minus variable expenses of $60 per hour), the...
Are insurance premiums a fixed cost? The cost of the insurance premiums for a company’s property insurance is likely to be a fixed cost. The cost of worker compensation insurance is likely to be a variable cost....
the amounts established at the time that the static budget was prepared and approved.) For costs that vary with volume or activity, the flexible budget will flex because the budget will include a variable rate per unit...
part of the total cost increases as an activity increases and it decreases as the activity decreases. Semivariable costs are also referred to as mixed costs. The equation for a semivariable cost is Total Cost = Fixed...
, i=? The PVOA factor of 4.623 appears in the PVOA table in the row where n=6, and where i = 8%. Hence, this loan has an implicit interest rate of 8%. Join PRO to Track Progress Mark the Question as Read Must-Watch Video...
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...
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.
The estimated scrap value at the end of the useful life of an asset used in the business. It is also referred to as residual value.
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.
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