A common cost. Often refers to the costs prior to the point where several products emerge from a common process.
A common cost. Often refers to the costs prior to the point where several products emerge from a common process.
causes of the overhead costs. Examples of Cost Allocations The following are only a few of the many cost allocations that occur in some companies or organizations: The cost of a manufacturing building is allocated to...
A corporation’s cost of capital is its weighted average after-tax cost of its debt, preferred stock, common stock, retained earnings, and other components of stockholders’ equity. The cost of capital is...
The cost of the next unit.
In estimating the ending inventory under the retail method the cost ratio is the cost of goods available divided by the retail value of the goods available.
Within a reasonable range of activity, the slope of the cost line is the variable rate, which is often denoted as ‘b’ in the straight line y = a + bx.
See Explanation of Standard Costing.
The cost associated with setting up a piece of production equipment. This would include the cost of the setup mechanic, the cost of scheduling, record keeping, moving the starting material, and testing the first few...
The additional cost of an additional quantity. It is similar to marginal cost, except that marginal cost refers to the cost of the next unit. Incremental cost might be the additional cost from the next 200 units.
See cost of goods sold.
To learn more, see our Nonmanufacturing Overhead Outline.
See incremental cost.
Usually a department within a company that is responsible for its costs but not revenues or profit.
What is the cost of sales? Definition of Cost of Sales Cost of sales is often a line shown on a manufacturer’s or retailer’s income statement instead of cost of goods sold. The cost of sales for a manufacturer is the...
See cost of goods sold.
The cost of repairing or replacing previously sold products during their warranty periods.
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....
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
variable costs and expenses equals the __________ __________. 4. A cost that is part fixed and part variable is referred to as a semivariable or __________ cost. 5. Which of the following would be considered to be the...
A decision whether to make some products or equipment in-house versus purchasing the products or equipment from another company. As in any decision, one must compare the relevant costs and other opportunities. It is...
A variance arising in a standard costing system that indicates the difference between the actual variable manufacturing costs incurred and the expected variable manufacturing overhead costs based on some activity such as...
One of the cost flow assumptions associated with the periodic inventory system. The first (oldest) costs are removed from inventory first and are charged to the income statement as cost of goods sold. The recent costs...
One of the cost flow assumptions associated with the periodic inventory system. The latest (recent) costs of goods purchased are removed from inventory first and are charged to the income statement as cost of goods sold....
Costs that have been divided up and assigned to periods, departments, products, etc. In depreciation it is the asset’s cost that is assigned to each of the years that the asset is in use. In cost accounting it is...
An income statement that subtracts all variable costs and expenses from revenues in order to show the contribution margin. From that is subtracted the fixed costs and expenses to arrive at net income. To learn more, see...
as a separate cost. Examples of Implicit Costs and Explicit Costs Let’s assume that a company gives a promissory note for $10,000 to a seller of a unique used machine for which the fair value is unknown. The...
What is the difference between a differential cost and an incremental cost? Definition of Differential Cost and Incremental Cost I use the terms differential cost and incremental cost to mean the same thing: the...
Why use normal costing instead of actual costing? Definition of Normal Costing For a manufacturer, normal costing means assigning the following costs to the actual goods produced each month: Actual direct materials...
using the indirect method? A Decrease In Inventory Wrong. An Increase In Accounts Payable Wrong. An Increase In Accounts Receivable Right! Depreciation Expense Wrong. 17. Which of the following will appear as a positive...
and it purchases goods with terms FOB shipping point. As a result the company is responsible for paying the cost of the carriage inwards. The company will record the amount in the general ledger account Carriage Inwards...
A current asset whose ending balance should report the cost of a merchandiser’s products awaiting to be sold. The inventory of a manufacturer should report the cost of its raw materials, work-in-process, and...
How do we deal with a negative contribution margin ratio when calculating our break-even point? Definition of Negative Contribution Margin A negative contribution margin ratio indicates that a company’s variable costs...
statements. If a company has small inventory amounts and significant sales, a simple cost system that spreads manufacturing overhead costs solely on the basis of machine hours can result in a reasonably accurate balance...
What is the difference between FIFO and LIFO? Difference Between FIFO and LIFO The difference between FIFO and LIFO will exist only if the unit costs of a company’s products are increasing or decreasing. U.S. companies...
How can I determine the inventory methods used by other companies in my industry? Definition of Inventory Methods Inventory methods refers to the order or manner in which a company moves its actual costs out of the...
at a premium. Any discount or premium on the bonds is recorded in a separate account. Another account is used to record the bond issue costs such as legal fees, auditing fees, registration fees, etc. These bond-related...
of vendor invoices, receiving reports, etc. Accounting for goods in transit, goods on consignment, etc. The cost of each item in inventory is based on the actual costs of the items purchased or produced by the company...
main operating activities involve the buying and selling of merchandise or goods. Therefore, the retailer’s income statement will report the following operating expenses: Cost of goods sold. These costs are reported...
will report on its income statement the insurance expense incurred for its selling, general and administrative functions. However, the insurance costs associated with the manufacturing function are included in the cost...
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