predict and estimate the future costs, but the past costs are otherwise irrelevant to the decision. That is why accountants will refer to a past cost as a sunk cost. Examples of Relevant Costs Assume that a company has...
predict and estimate the future costs, but the past costs are otherwise irrelevant to the decision. That is why accountants will refer to a past cost as a sunk cost. Examples of Relevant Costs Assume that a company has...
costs because they are not assigned to products, and therefore cannot be included in the cost of items held in inventory. If a selling, general and administrative (SG&A) expense is prepaid, the prepaid portion will...
Should a manufacturer's selling prices be based on costs? A manufacturer’s selling prices should not be based on costs alone. One reason is that the actual cost of each product is not known with precision. At...
How do you calculate opportunity costs? Definition of Opportunity Costs Opportunity costs are the profits a company (or person) missed, or the contribution margin that was missed. Opportunity cost might be thought of as...
Our Explanation of Activity Based Costing illustrates how manufacturing overhead costs for a product will differ when costs are allocated using only the number of machine hours, as opposed to being allocated using the...
costs; what the costs should be) the company is on track to reach the cost part of its profit plan. If the actual costs deviate from the standard costs, management is alerted by the variances that are reported for...
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...
What are LIFO layers? Definition of LIFO Layer LIFO is the acronym for Last-In, First-Out. In the context of inventory, it means that the cost of the most recently purchased units will be the first costs to be matched...
Our Explanation of Bank Reconciliation will show you the needed adjustments to the balance on the bank statement and also the adjustments needed to the balance in the related general ledger account. A comprehensive...
What is the advantage of using historical cost on the balance sheet for property, plant and equipment? Definition of Historical Cost Historical cost is the original cost of an asset including all the necessary costs to...
In standard costing, how is the purchase price variance reclassified to arrive at actual cost? Definition of Purchase Price Variance In standard costing, the purchase price variance is the difference between the actual...
Why does our company's balance sheet report its land at cost when it is so much more valuable? Accountants are guided by the cost principle. This requires accountants to report assets at their cost when...
cost of $100.00 equals a gross profit of $66.67. The gross profit of $66.67 divided by the selling price of $166.67 = a gross margin of 40%. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn...
Financial Statements Video Training Part 9 Income statement: revenues, cost of goods sold, expenses, nonoperating items Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your...
would include $10,000 of variable cost (100,000 MHs times $0.10) with the remainder of $6,000 being the fixed cost for the month. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to...
The dollar amount associated with the goods in a company’s inventory. Initially the cost per unit is the cost to get the inventory items in place and ready for use. However, under certain circumstances the cost may...
Also referred to as illusory profits. Occurs because accountants use past costs rather than replacement costs. For example, in computing the cost of goods sold accountants often use the FIFO cost flow assumption. This...
What is a dependent variable? In accounting, a dependent variable is likely to be the total of a mixed cost that will change as the result of several factors. A factor that causes the change in the total cost is referred...
statements of both years will report incorrect amounts for the cost of goods sold, gross profit, and net income. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting...
This stockholders’ equity account will have a credit balance from selling some of its treasury stock for more than its cost. paid-in capital from treasury stock This stockholders’ equity account will have a credit...
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...
in the balance sheet account Inventory: $400 (80 units X $5) Cost of goods sold: $4,600 ($5,000 – $400) or (920 units X $5) Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance...
were added to inventory, they are not part of the cost of goods sold. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at...
record for sorting and storing transactions. general ledger account This is a company’s record for sorting and storing transactions. Mark as wrong Mark as right check register This record is usually maintained by an...
Why does LIFO usually produce a lower gross profit than FIFO? Definition of LIFO LIFO (which is the acronym for Last In, First Out) is a cost flow assumption in which the most recent costs of inventory items are the...
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...
that companies must provide. The cost of the workers’ compensation insurance is paid by the employer. Many view the cost as another fringe benefit and will include the cost in its fringe benefit rate. Hence, the cost...
What is direct labor? Definition of Direct Labor Direct labor refers to the employees and temporary staff who work directly on a manufacturer’s products. (People working in the production area, but not directly on the...
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...
too little ending inventory could be any or all of the following: Omitting some inventory items when counting the ending inventory Miscounting some inventory items Math errors occurring during the tabulation of the cost...
for $100, its gross profit is $20. This results in a gross profit percentage or gross margin ratio of 20% of the selling price. Therefore, when the company has sales of $50,000 it is assumed that its cost of those goods...
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...
a vibrant campus placement or career services office with a track record of placing accounting students in the professional positions that you seek. Here’s my point. What if many of the top performers on the CPA Exam...
will be paying investors more than the interest required by the market ($300,000 semiannually instead of $295,000 semiannually), the investors will pay more than $10,000,000 for the bonds. If we assume the investors pay...
will record an account receivable when it delivers a truckload of goods to a customer on June 1 and the customer is allowed to pay in 30 days. From June 1 until the company receives the money, the company will have an...
Journal A general journal is used to record unique journal entries that cannot be processed in a more efficient manner. For example, checks written, sales invoices issued, purchase invoices received, and others can be...
revenues and the related liabilities that were included in a previously recorded transaction To record depreciation expense and/or bad debts expense and the change in the related contra asset account Definition of...
What does double entry mean? Definition of Double Entry In accounting, double entry means that every transaction will involve at least two accounts. Double entry also requires that one account be debited and the other...
is required, the company borrowing the money will record and report the amount owed as Notes Payable. If the creditor is a vendor or supplier that did not require the company to sign a promissory note, the amount owed...
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