See mixed expenses.
See mixed expenses.
A cost or expense where the total changes in proportion to changes in volume or activity. For example, if a company pays a sales commission on all of its sales, commission expense is a variable expense because...
What is prime cost? Definition of Prime Cost In cost accounting, the prime cost of a manufactured product is the combination of the following: Direct materials cost Direct labor cost The indirect manufacturing costs...
See fixed expenses.
To learn more, see our Nonmanufacturing Overhead Outline.
What is marginal cost? Definition of Marginal Cost Marginal cost is a manufacturer’s cost to produce one more unit of product. In other words, marginal cost is the change in total costs when one additional unit is...
What is an indirect cost? Definition of Indirect Cost An indirect cost is a cost that is not directly traceable to a cost object (product, department, etc.). Rather, the indirect cost is sometimes referred to as a common...
The planned or expected costs. Often used in manufacturing for accounting for inventories and production. When actual costs differ from the standard costs, variances are reported.
The amount of an asset’s cost that will be depreciated. It is the cost minus the expected salvage value. For example, if equipment has a cost of $30,000 but is expected to have a salvage value of $3,000 then the...
Costs that have both a fixed and variable component. For example, the cost of operating an automobile includes some fixed costs that do not change with the number of miles driven (e.g., operating license, insurance,...
In the EOQ model, the holding costs are the incremental costs of storing or holding an item in inventory for one year.
The original cost incurred to acquire an asset (as opposed to replacement cost, current cost, or cost adjusted by a general price index). If a company purchased land in 1980 for $10,000 and continues to hold that land,...
A cost that can be traced to a cost object. For example, the flour used in baking bread is a direct cost of a bakery’s bread. The wages and salaries of the employees working exclusively in a manufacturer’s...
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.
A past, historical cost. They are called sunk because a past cost cannot be changed and decisions involve only the present and the future.
A cost object is often a product or department for which costs are accumulated or measured. For example, a product is the cost object for direct materials, direct labor and manufacturing overhead. The factory maintenance...
. The benefit foregone by choosing another course of action is known as the __________ cost. 8. A separable cost occurs __________ the split-off point. Select... after before 9. The allocation of joint costs at the...
See weighted-average cost flow assumption and moving-average cost of inventory.
This phrase has two connotations. One is the cost of holding inventory. In this case the carrying cost is the cost of capital tied up in inventory, the cost of storage, insurance, and obsolescence. Often this is...
Costs that have been used up or consumed. Expired costs are reported as expenses. (Costs that have not yet expired are reported as assets.)
What is the cost of capital? Definition of Cost of Capital The cost of capital is the weighted-average, after-tax cost of a corporation’s long-term debt, preferred stock (if any), and the stockholders’ equity...
What are semivariable costs? Definition of Semivariable Costs Semivariable costs are costs or expenses whose behavior is partially fixed and partially variable. That is, part of the total cost does not increase or...
cost, appraised value, and assessed value amounts range from $150,000 to $270,000. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career...
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...
What is a cost driver? Ideally, a cost driver is an activity that is the root cause of why a cost occurs. In the past century, the root cause of indirect manufacturing costs has changed from a single cost driver (such as...
What is a deferred cost? Definition of Deferred Cost A deferred cost is a cost that is already recorded in a company’s accounts, but at least some of the cost should not be expensed until a future accounting period....
Direct materials, direct labor and manufacturing overhead costs. Also referred to as product costs, production costs, and inventoriable costs.
What is a fixed cost? Definition of Fixed Cost A fixed cost is one that does not change in total within a reasonable range of activity. Since the fixed cost remains constant in total, the fixed cost per unit of activity...
See manufacturing costs.
A common cost. Often refers to the costs prior to the point where several products emerge from a common process.
What are manufacturing costs? Definition of Manufacturing Costs Manufacturing costs are the costs of materials plus the costs to convert the materials into products. All manufacturing costs must be assigned to the units...
Variable costs and expenses divided by net sales. To learn more, see Explanation of Break-even Point.
What is the cost principle? Definition of Cost Principle The cost principle is one of the basic underlying guidelines in accounting. It is also known as the historical cost principle. The cost principle requires that...
since it will increase when the ovens must operate for a longer time in order to produce additional loaves of bread. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your...
R & D costs. These are costs incurred to develop new products or processes that may or may not result in commercially viable items. The general rule is that research and development costs are to be expensed...
What are direct costs? Definition of Direct Costs Direct costs are directly traceable to a cost object such as a product or a department. In other words, direct costs do not have to be allocated to a product, department,...
Bond Issue Costs is a contra liability accounts reported along with Bonds Payable. Bond Issue Costs include the professional fees and registration fees associated with the issuance of bonds. The amount in the account...
The next best benefit foregone. The opportunity lost. Often measured as the contribution margin given up by not doing an activity. For example, if a sole proprietor is foregoing a salary and benefits of $50,000 at...
See bond issue costs.
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