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 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...
The cost of repairing or replacing previously sold products during their warranty periods.
What is opportunity cost? Definition of Opportunity Cost Opportunity cost is the profit that was lost or missed because of some action or failure to take some action. Some refer to opportunity cost as opportunity lost....
of Indirect Costs For example, the depreciation of a company’s manufacturing building is an indirect cost of the following: The manufacturing departments within the building The products that are manufactured in the...
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...
To learn more, see our Nonmanufacturing Overhead Outline.
What is cost incurred? Definition of Cost Incurred A cost incurred is a cost that a company (or other organization) becomes liable for. Example of Cost Incurred Assume that a retailer begins operations on December 1 and...
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...
See our Standard Costing Outline.
Usually a department within a company that is responsible for its costs but not revenues or profit.
, or inflation-adjusted cost. Generally, the cost principle or historical cost principle requires that an asset should be reported at its cash or cash equivalent amount at the time of the transaction and should include...
For a merchandiser this is the cost of merchandise purchased after deducting purchase returns, purchase allowances, and purchase discounts but after adding freight-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.
Costing system wherein fixed manufacturing overhead is allocated to (or absorbed by) products being manufactured. This system, which treats fixed manufacturing costs as a product cost, is required for external financial...
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.
, work-in-process, finished goods) and the cost of goods sold will contain the standard costs. (Think of the standard costs as the “should be” costs which are tied to the amounts in the company’s profit plan.) Any...
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...
See incremental cost.
See Explanation of Standard Costing.
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...
Our Explanation of Inventory and Cost of Goods Sold will take your understanding to a new level. You will see how the income statement and balance sheet amounts are affected by the various inventory systems and cost flow...
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...
How do I compute the product cost per unit? Definition of Product Cost per Unit In accounting, a product’s cost is defined as the direct material, direct labor, and manufacturing overhead. Other costs such as...
the costs of products are likely to change during an accounting year (seems there is always some inflation), a company must select a cost flow assumption that will be used consistently. Examples of cost flow assumptions...
in dollars or in units, the numerator is __________ costs. FIXED DFEIX Unscramble FIXED XFDIE Unscramble 8. A cost that is partly fixed and partly variable is referred to as a ____________ cost. MIXED DEXIM Unscramble...
removed from inventory and charged to the cost of goods sold will be the last cost of 4 units, which is $11 each. This means the cost of its December 31 inventory using periodic LIFO will be $31 (1 unit at $11 plus 2...
the goods on the truck belong to the buyer, the buyer should pay the shipping costs. These shipping costs will be an additional cost of the goods purchased. Example of FOB Destination Now assume that a seller quoted...
A symbol that indicates the total amount of fixed costs during a specified period of time. In the equation of the straight line, y = a + bx, the total amount of fixed costs during the period is represented by...
Also referred to as manufacturing overhead, factory overhead, indirect manufacturing costs, or manufacturing support costs. To learn more, see Explanation of Manufacturing Overhead.
Also referred to as manufacturing overhead, indirect manufacturing costs, factory burden, and manufacturing support costs. To learn more, see Explanation of Manufacturing Overhead.
A cost flow assumption where the first (oldest) costs are assumed to flow out first. This means the latest (recent) costs remain on hand. To learn more, see Explanation of Inventory and Cost of Goods Sold.
A cost flow assumption where the last (recent) costs are assumed to flow out of the asset account first. This means the first (oldest) costs remain on hand. To learn more, see Explanation of Inventory and Cost of Goods...
Accounting reports that identify the differences between standard costs and actual costs, between budget amounts and actual amounts, etc.
variable costs and expenses equals the __________ __________. 4. A cost that is part fixed and part variable is referred to as a semivariable or __________ cost. 5. Which of the following would be considered to be the...
Our Explanation of Inventory and Cost of Goods Sold will take your understanding to a new level. You will see how the income statement and balance sheet amounts are affected by the various inventory systems and cost flow...
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...
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