In activity-based costing this refers to the allocation of costs to activities. For example, allocating the costs of setting up the manufacturing equipment to run a batch of product to the activity “setup...
In activity-based costing this refers to the allocation of costs to activities. For example, allocating the costs of setting up the manufacturing equipment to run a batch of product to the activity “setup...
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...
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...
A method of costing manufactured items that differs from normal costing and standard costing. Under actual costing each accounting period’s actual manufacturing overhead costs and each accounting period’s...
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...
overhead, which is an indirect product cost that must be assigned to units of product manufactured on a logical basis. As a result, part of the rent is included in the units’ costs which are in inventory or have been...
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...
Is a manufacturer's product warranty part of its manufacturing overhead or is it part of its SG&A expense? The costs associated with a manufacturer’s product warranty are part of its selling expenses and...
. A manufacturer’s inventory consists of the cost to produce the items (the costs of direct materials, direct labor, and manufacturing overhead). Sometimes a company’s inventory cost has to be reduced to a lower...
insurance for the employees in the manufacturing operations should be included in the costs of the products manufactured. The products that have been sold will have their costs (including their share of worker...
What does an unfavorable volume variance indicate? An unfavorable volume variance indicates that the amount of fixed manufacturing overhead costs applied (or assigned) to the manufacturer’s output was less than the...
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....
What is a predetermined overhead rate? Definition of Predetermined Overhead Rate A predetermined overhead rate is often an annual rate used to assign or allocate indirect manufacturing costs to the goods it produces....
Is depreciation a direct or indirect cost? Definition of Depreciation Depreciation is defined as the systematic expensing of the cost of an asset such as equipment, building, vehicle, etc. over the useful life of the...
Are repairs to office equipment and factory equipment period costs? Repairs to office equipment are period costs. That is, the cost of the repairs to office equipment will be reported as a selling, general and...
are at various stages of completion at the end of a month, __________ units of production are used for assigning a department’s manufacturing costs to products. 3. Conversion costs consist of direct __________ and...
What is the major weakness of the traditional method of allocating factory overhead? Definition of Traditional Method Allocating Factory Overhead The traditional method of allocating factory overhead (manufacturing...
that the common costs or indirect costs that require allocation are not caused by volume. In other words, traditional cost allocations are often based on something other than the root causes of the costs. It is possible...
The systematic allocation of the costs incurred to issue bonds (reported in a contra liability account) to Interest Expense over the life of the bonds.
will be due five years later. In addition to the one-time loan costs of $120,000 the company will also have the cost of the borrowed money which is $360,000 ($4 million X 9%) of interest each year for five years. It...
What are out-of-pocket costs? Out-of-pocket costs are those costs or expenses that require a cash payment in the current period or during a project. For example, the wages of the person setting up a machine for a new...
In cost accounting this term means to allocate, apply, apportion, or spread manufacturing overhead costs to the production output. In terms of accounts receivable, assign means to pledge accounts receivable to a lender...
A method used in allocating the costs of manufacturing service departments (factory administration, maintenance, etc.) directly to the producing departments in the factory. Under this method, no service department cost...
The indirect manufacturing costs actually incurred during an accounting period.
A single overhead rate for assigning all of the manufacturing production and service department costs to products. This rate is less accurate than departmental rates if a company manufactures a diverse group of...
The estimated volume in a future period that will be used for allocating indirect manufacturing costs.
will decrease as one learns or experiences the task. 16. The goal of target __________ is to reduce manufacturing costs so that a product can be priced competitively and yet be profitable. 17. A potential benefit of the...
A variance arising in a standard costing system that indicates the difference between the standard amount of variable manufacturing overhead for the good units produced (standard hours times standard rate) and the...
A variance arising in a standard costing system that indicates the difference between the actual amount of fixed manufacturing overhead incurred and the budgeted amount of fixed manufacturing overhead. To learn more, see...
A variance arising in a standard costing system that indicates the difference between the standard amount of fixed manufacturing overhead for the good units produced (standard hours times standard rate) and the budgeted...
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...
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...
service department is responsible for its costs. Hence, the service departments are separate cost centers. The costs incurred by the service departments are considered to be indirect manufacturing costs that ultimately...
What is setup cost? Definition of Setup Cost In manufacturing, setup cost is the cost incurred to get equipment ready to process a different batch of goods. Hence, setup cost is regarded as a batch-level cost in activity...
to increase the total amount of its fixed costs . Example of Relevant Range Let’s assume that a manufacturer’s monthly production volume is consistently between 10,000 to 13,000 units of product requiring between...
A factory or manufacturing overhead rate used to allocate, apply, assign, or spread indirect product costs to items manufactured. Under traditional cost accounting, the burden rate might be a percentage of direct labor...
What is meant by overabsorbed? Overabsorbed is usually used in the context of a manufacturer’s production overhead costs. Since manufacturing overhead costs are not directly traceable to products, they need to be...
fitting line between costs and volume or activities is __________ analysis. 5. A cost that is part fixed and part variable is referred to as a semivariable or __________ cost. 6. When there is an increase in volume...
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