Costs that have been used up or consumed. Expired costs are reported as expenses. (Costs that have not yet expired are reported as assets.)
Costs that have been used up or consumed. Expired costs are reported as expenses. (Costs that have not yet expired are reported as assets.)
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...
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...
Variable costs and expenses divided by net sales. To learn more, see Explanation of Break-even Point.
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...
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.
See mixed expenses.
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...
Also referred to as a sunk cost. A past cost is not relevant to a decision.
In manufacturing, the product cost includes direct materials, direct labor, and manufacturing overhead. A retailer’s product cost is the net cost from suppliers plus costs to get the product in place and ready for...
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...
See incremental cost.
A cost associated with a batch of items, but not directly traceable to an individual item within the batch. For example, the cost to set up a machine to run a batch of 5,000 items is a batch-level cost. This cost must...
The recognition that a dollar in the present is more valuable than a dollar in the future. Present-value calculators and present-value tables assist in converting future dollars to the present value in order to make a...
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...
A check that is not paid by the bank on which it is written (drawn). Often the reason a check is not paid is that the account on which the check was drawn did not have a sufficient balance. In that case the check is...
Budgetary slack means providing a cushion in a budget in order to avoid an unfavorable variance at the end of the budget year. The budgetary slack might be achieved by entering budget expense amounts that are larger than...
Preferred stock where past, omitted dividends do not have to be paid before a dividend can be paid to common stockholders. In the case of noncumulative preferred stock, only its current year dividend needs to be paid in...
Cash and other resources that are expected to turn to cash or to be used up within one year of the balance sheet date. (If a company’s operating cycle is longer than one year, an item is a current asset if it will...
One of the types of adjusting entries that are made at the end of the accounting period in order to report (1) revenues that have been earned but have not yet been entered into the accounting records, and/or (2) expenses...
The expense associated with a commitment to repair or replace a product for a specified period of time. The expense should be reported on the income statement at the time that the sale of the product is reported in order...
A government index that tracks the changes in prices in order to measure general inflation. This index can be used by small companies to obtain the benefits of LIFO without tracking individual units in inventory. See 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...
As you can see, the direct labor costs are considered to be both a prime cost and a conversion cost. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and...
to the truck. The $30,000 cost increases the company’s assets, but will be reduced by depreciating the cost to expense over the next 5 years. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn...
Why do companies use cost flow assumptions to cost their inventories? Cost flow assumptions are necessary because of inflation and the changing costs experienced by companies. If costs were completely stable, it...
Why is the distinction between product costs and period costs important? The distinction between product costs and period costs is important to: Properly measure a company’s net income during the time specified on its...
will be an explicit cost presented as salary expense on the corporation’s income statement. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping...
to the products or to the cost of inventory. The period costs are usually associated with the selling function of the business or its general administration. The period costs are reported as expenses in the accounting...
What is the production volume variance? Definition of Production Volume Variance The production volume variance is associated with a standard costing system used by some manufacturers. This variance arises when there is...
because U.S. accounting principles and income tax regulations require manufacturers to follow full absorption costing. This means that the cost of manufactured goods must include the costs of the direct materials,...
precise cost. 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 your current job Refresh your skills to re-enter the...
What is a plant-wide overhead rate? Definition of Plant-wide Overhead Rate A plant-wide overhead rate is often a single rate per hour or a percentage of some cost that is used to allocate or assign a company’s...
). However, the traditional method will be inadequate for determining the true cost for diverse goods being produced and sold to customers with diverse demands. Join PRO to Track Progress Mark the Question as Read...
burden, or burden. US GAAP requires that indirect manufacturing costs be allocated to, assigned to, or absorbed by the manufacturer’s output (in addition to the cost of direct materials and direct labor) for its...
units and the partially completed units are expressed in terms of fully completed units. Equivalent units are used in the production cost reports for the producing departments of manufacturers using a process costing...
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