of a single factor (such as machine hours) is likely to lead to misleading costs for a manufacturer’s goods. To address this deficiency, the activity based costing (ABC) method attempts to identify all of the diverse...
of a single factor (such as machine hours) is likely to lead to misleading costs for a manufacturer’s goods. To address this deficiency, the activity based costing (ABC) method attempts to identify all of the diverse...
. The second subtotal is the amount of operating income. Example of a Multiple-Step Income Statement Here is an example of a condensed multiple-step income statement for a hypothetical sole proprietorship: Notice these...
activities. REVENUES URVEEENS Unscramble REVENUES NUEVSREE Unscramble 2. A retailer's revenues. SALES SLSEA Unscramble SALES SSALE Unscramble 3. Costs used up in order to earn revenues. EXPENSES ENEESPSX Unscramble...
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...
referring to the cost of producing the very next unit or operating for just one more hour, etc.) Example of Differential Cost and Incremental Cost Assume a company determined that the annual cost of operating its...
. Examples of ROI In the past, ROI was helpful for monitoring the decentralized divisions of large diverse corporations. The ROI calculation meant dividing division’s operating income by the average amount of operating...
Our Explanation of Nonprofit Accounting includes a chart that contrasts the financial statements of a nonprofit (or not-for-profit) organization with those of a for-profit business corporation. There are many examples to...
of a condensed single-step income statement for a hypothetical sole proprietorship (with our added notation of A, B, and A-B): Notice these items on the single-step income statement: There is only one subtraction:...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
A general ledger account which serves to summarize similar transactions. For example, all of the closing entries involving operating expenses might be posted to an operating expense clearing (or summary) account.
The income statement format where the operating and nonoperating revenues are grouped and totaled and the operating and nonoperating expenses are grouped and totaled. Then there is one subtraction of the combined...
. A nonprofit organization’s financial reporting includes a statement of financial position, a statement of activities, a statement of functional expenses, and a statement of cash flows. Some nonprofits are required to...
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...
A measurement of financial performance of a company’s operating division that is not responsible for its financing and income taxes. The calculation is likely to be 1) the division’s operating income before...
What does NOI stand for? NOI is the acronym for net operating income. Net operating income is also referred to as income from operations. NOI excludes discontinued operations, extraordinary items, and nonoperating (or...
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,...
of the division’s headquarters or executive’s office.) With that in mind, ROCE is calculated as follows: The division’s Operating Income (before income taxes and before interest expense) divided by the Assets...
other comprehensive income is not considered.) A corporation’s EBIT could be the same as its operating income. However, if the corporation has nonoperating revenues and/or gains and/or certain losses, the...
involving: Operating revenues Operating expenses Non-operating revenues and gains Non-operating expenses and losses Large companies may have thousands of income statement accounts in order to budget and report revenues...
operating businesses each of which is responsible for its revenues and expenses. However, investment decisions for the operating businesses remain centralized. That is, the corporation’s executive officers decide...
, a not-for-profit organization, or nonprofit, will issue a statement of _____________. ACTIVITIES ISIETVTICA Unscramble ACTIVITIES VCIITISEAT Unscramble 2. The balance sheet of a nonprofit will likely have as part of...
by reading our Nonprofit Accounting (Explanation). 1. A nonprofit's revenues and expenses are reported on its statement of __________ activities. 2. The accounting equation of a nonprofit is Assets = Liabilities +...
In activity-based costing this refers to the allocation of the cost of activities (determined by stage 1 allocations) to the cost objects such as products or services.
A management tool that identifies the critical path—the path of sequential activities requiring the longest time to complete.
Costs that are common to several products, processes, activities, departments, territories, etc. Often common costs are subsequently allocated to each of the joint products, joint processes, etc. in order to determine...
Rather than the previous year’s budget being the starting point for the next budget, a zero-based budget assumes no activities: everything in the budget must be justified.
The financial statements of nonprofits include the statement of financial position, the statement of activities, the statement of cash flows, notes to the financial statements, and the statement of functional expenses....
The activities provided by a nonprofit in carrying out one of its major programs.
Our Explanation of Nonprofit Accounting includes a chart that contrasts the financial statements of a nonprofit (or not-for-profit) organization with those of a for-profit business corporation. There are many examples to...
hours alone will be too low in relationship to the true cost of manufacturing this product. Another product might require many machine hours but no other activities. This product’s cost will be overstated because the...
Obligations due within one year of the balance sheet date. (If a company’s operating cycle is longer than one year, an item is a current liability if it is due within the operating cycle.) Another condition is that...
. A retailer’s cost of goods sold can be computed as follows: beginning inventory + net purchases – __________ __________. 36. Revenues which are earned from activities outside of a company’s main business...
Also known as the periodicity assumption. The accounting guideline that allows the accountant to divide up the complex, ongoing activities of a business into periods of a year, quarter, month, week, etc. The precise time...
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...
Costs that have been divided up and assigned to periods, departments, products, etc. In depreciation it is the asset’s cost that is assigned to each of the years that the asset is in use. In cost accounting it is...
-profit models. In other words, the planned sales mix is 20%, 50%, 30%. With this volume and sales mix the company is planning to have a small operating loss. Now let’s assume that the total units actually sold were...
See chief operating officer.
See net operating income (NOI).
Costs that are matched with revenues on the income statement. For example, Cost of Goods Sold is an expense caused by Sales. Insurance Expense, Wages Expense, Advertising Expense, Interest Expense are expenses matched...
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