The accounting focused on determining the cost per unit of a manufacturer in order to value inventory and cost of goods sold. It is also used to determine unit costs of items processed in service businesses, such as a...
The accounting focused on determining the cost per unit of a manufacturer in order to value inventory and cost of goods sold. It is also used to determine unit costs of items processed in service businesses, such as a...
A selling expense account shown on the income statement in order to match this expense to the related sales.
An additional quantity of items held in inventory in order to minimize the chance of an item being out of stock.
Using capital stock (common stock or preferred stock) instead of debt in order to finance an investment such as a plant asset.
A request by the petty cash custodian for a company check in order to return the amount of currency and coins in the petty cash box to the amount shown in the general ledger account.
An original record containing the details to substantiate a transaction entered in an accounting system. For example, the source document for a purchase of merchandise is the supplier’s invoice supported by the...
The cost to hold an item in inventory. Includes the cost of capital tied up in inventory, the cost of space and insurance, and the cost of items becoming obsolete while being held in inventory. This is an important...
Usually a simple form used by the petty cash custodian in order to document small payments from a petty cash box.
are referred to as __________ checks. 3. Checks received from customers on December 31, but not deposited until January 2 are referred to as deposits __________ __________. 4. Recording $980 as $890 is known as a...
will have the accounts arranged in the same order as the general ledger. A common order for a business corporation is: Account Numbers It is common for the first digit of each account number to indicate the type of...
What are production costs? Definition of Production Costs In managerial accounting and cost accounting, production costs are the costs that occur in the manufacturing facilities. Production costs are also referred to as...
The cost of repairing or replacing previously sold products during their warranty periods.
Cost of goods sold is usually the largest expense on the income statement of a company selling products or goods. Cost of Goods Sold is a general ledger account under the perpetual inventory system. Under the periodic...
What is an incremental cost? Definition of Incremental Cost An incremental cost is the difference in total costs as the result of a change in some activity. Incremental costs are also referred to as the differential...
A current or future cost that will differ among alternatives. For example, if a company is deciding whether to expand its sales territory, the real estate tax and depreciation on the company’s headquarters building...
The accounting guideline requiring amounts in the accounts and on the financial statements to be the actual cost rather than the current value. Accountants can show an amount less than cost due to conservatism, but...
See indirect manufacturing costs.
The incremental cost of storing or holding inventory. It is an annual percentage that includes the cost of rent, insurance, cost of capital, deterioration and obsolescence.
An assumption that determines the order in which costs should flow out of a balance sheet account (e.g. Inventory, Investments, Treasury Stock) when the item is sold. For an illustration of the cost flow assumption, see...
What is a variable cost? Definition of Variable Cost A variable cost is a constant amount per unit produced or used. Therefore, the total amount of the variable cost will change proportionately with the change in volume...
See inventory carrying costs.
See incremental cost.
The combination of direct materials and direct labor.
What are inventoriable costs? Definition of Inventoriable Costs Inventoriable costs are: A retailer’s cost of the goods (products) that it purchased for resale, and any additional cost to get the goods in place and...
of labor and a standard cost per hour of labor Manufacturing overhead: a budget for the fixed overhead, the standard variable overhead rate, and the standard quantity for applying a fixed and variable overhead rates In...
What is a cost center? Definition of Cost Center A cost center is often a department within a company. The manager and employees of a cost center are responsible for its costs but are not directly responsible for...
An amount that should be charged to the current accounting period as an expense.
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....
The cost of the next unit.
inventory. The cost of sales does not include selling, general and administrative (SG&A) expenses, or interest expense. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your...
The amount needed to replace an asset such as inventory, equipment, buildings, etc. If an asset’s replacement cost is greater than the asset’s carrying amount, the cost principle prohibits the use of the...
What is a product cost? Definition of a Retailer’s Product Cost In accounting, a retailer’s product cost is the cost paid to a supplier plus any other costs that are necessary to get the product in place and ready...
The combination of a manufacturer’s direct labor and factory overhead.
Usually a department within a company that is responsible for its costs but not revenues or profit.
Also referred to as a sunk cost. A past cost is not relevant to a decision.
Also referred to as manufacturing overhead, factory burden, factory overhead, and manufacturing support costs. To learn more, see Explanation of Manufacturing Overhead.
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 change in total costs in response to the change in some activity. For example, some of the costs of owning and operating a vehicle will increase in total with an increase in miles driven. These are referred to as...
A cost or expense that is not directly traceable to a department, product, activity, customer, etc. As a result indirect costs and expenses are often allocated to the department, product, etc. For example, a...
Assigning more manufacturing overhead to production than the amount that was actually incurred.
Featured Review
"I was interested in getting my finances under control. I was advised to track my expenses but I had no background in accounting. I wanted to do proper record keeping and not just of expenses, but my wealth. I came across many tutorials online. The most comprehensive tutorials were those of AccountingCoach. After being able to quickly learn, I decided to go PRO to have access to additional learning tools. I love the quizzes, they help me determine if I truly understand the material. After 1 year, I know enough about accounting to manage my finances and grow my wealth. Going PRO is one of the best investments I've made. Thank you AccountingCoach!" - Alex L.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: