Our Explanation of Future Value of a Single Amount will show you the power of compounded interest on a single deposit. You will see how the future value tables can be useful as well as the rule of 72.
Our Explanation of Future Value of a Single Amount will show you the power of compounded interest on a single deposit. You will see how the future value tables can be useful as well as the rule of 72.
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...
What is meant by the full cost of a product? Many (perhaps most) accountants use the term full cost to mean the full manufacturing or production cost of a product. To these accountants this means a product’s cost of...
The costs that should have occurred for the actual good output are known as standard costs, which are likely integrated with a manufacturer’s budgets, profit plan, master budget, etc. The standard costs involve the...
classified into three groups: Raw materials used in the product Direct labor used to make the product Manufacturing overhead incurred to make the product Since the manufacturing overhead costs are indirect costs, they...
$232,000. The result was a favorable SG&A expense budget variance of $8,000. Manufacturing overhead costs were budgeted to be $400,000 but were actually $393,000. The result was a favorable manufacturing overhead...
, the resulting allocation is somewhat arbitrary. Because of the arbitrariness, some people describe cost allocation as the spreading of a cost. Accountants have made efforts to improve the cost allocation techniques....
to be recorded as Manufacturing Overhead. Manufacturing Overhead is allocated to the products manufactured and will be part of the products’ cost. If the products are in Inventory, those products’ costs are assets....
Are there two ABC methods in accounting? Some accountants use ABC to mean Activity Based Costing. Under this ABC a manufacturer will use many cost drivers to assign overhead costs to products. The objective of Activity...
or standard cost per pound The quantity variance identifies whether the actual quantity of the input used was more or less than the planned or standard quantity for the actual output The variance analysis of...
with the costs of direct labor and manufacturing overhead) A prime cost The costs of direct materials are reported in the financial statements based on where they are: Raw materials not yet in production are...
What are indirect manufacturing costs? Definition of Indirect Manufacturing Costs Indirect manufacturing costs are a manufacturer’s production costs other than direct materials and direct labor. Indirect manufacturing...
, and manufacturing overhead that are included in the products that moved from the manufacturing area to the finished goods inventory during the accounting period. The calculation is presented as a schedule or statement....
consist of the costs of direct materials, direct labor, and manufacturing overhead Examples of Inventoriable Costs Assume that a retailer purchases an item for resale by paying $20 to the supplier. The item is purchased...
An interest rate that is not explicit. For example, if a business lends its majority owner $100,000 at 0% interest, the IRS might determine that a fair interest rate would be 6% and not 0%. The IRS will impute interest...
Market interest rate, current return, effective interest rate. Also see yield to maturity.
A symbol that indicates the variable cost rate and also the slope of a straight line. For example, in the equation of the straight line, y = a + bx, ‘b’ represents the variable cost rate per unit of...
Our Explanation of Evaluating Business Investments compares four of the techniques for reviewing potential capital expenditures. You will be introduced to accounting rate of return, payback, net present value, and...
deposit that remains invested for many years at a high rate of interest will result in a very large amount. Example 1. Assume that someone inherits $100,000 and the amount is deposited in an investment that is not taxed...
Our Explanation of Present Value of an Ordinary Annuity uses the appropriate present value factors for discounting a stream of equal cash amounts occurring at equal time intervals. An important feature is the use of loan...
The result after subtracting the income tax associated with a given amount. For example, if a corporation has a gain of $100,000 before tax, and its income tax rate is 30%, its after-tax gain is $70,000. If a corporation...
A variance arising in a standard costing system that indicates the difference between 1) the standard cost of the direct labor that should have been used (the standard hours times the standard rate) for the good output,...
A technique for estimating the number of years or the interest rate necessary to double your money. Divide 72 by the interest rate and you will have the approximate number of years needed to double your money. If your...
A person whose pay is based on an annual amount (instead of being based on an hourly rate of pay multiplied by actual hours worked). For example, the officers of a corporation and the heads of departments within a...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
What is the payback reciprocal? The payback reciprocal is a crude estimate of the rate of return for a project or investment. The payback reciprocal is computed by dividing the digit “1” by a project’s payback...
plus your company’s matching of those taxes. State and federal unemployment taxes not yet remitted. Your state can tell you the rate for your company and the wages to which the rate applies. For example, it might be...
on bonds from the balance sheet to interest expense. It results in each period’s interest expense correlating exactly with the amount of the bond’s book value (or carrying value). Mark as wrong Mark as right...
or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. Variable costing is also known as __________ costing. 2. Under variable costing, the...
are not an expense and therefore do not reduce the corporation’s net income or its taxable income. Example of Tax Advantage of Bonds Instead of Stock If a corporation issues $10,000,000 of bonds having an interest...
to the company’s weak financial position it would normally have to pay a high interest rate if it were able to borrow money. In this example, the promissory note does not show an explicit interest cost. However, due...
amount) discounted by the market interest rate at the time of the bond sale. Example of a Bond Premium A person would buy a bond at a premium (pay more than its maturity value) because the bond’s stated interest rate...
, present value, or market value of a bond = the total of the semiannual interest payments PLUS the amount that will be received when the bond matures both discounted by the current market interest rate. The total of...
What is premium on bonds payable? Definition of Premium on Bonds Payable Premium on bonds payable (or bond premium) occurs when bonds payable are issued for an amount greater than their face or maturity amount. This is...
-time professional would be 30% (the 6 people leaving during the year divided by the company’s 20 positions). For the full-time clerical, the staff turnover rate is 3 divided by 6, for a rate of 50%. For the part-time...
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...
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 technique for allocating costs to a product, service, customer, etc. The premise is that activities cause an organization to incur costs. Once the costs of the activities have been identified and each activity’s...
Our Explanation of Present Value of a Single Amount discusses the time value of money and the need to discount future amounts to the time of an investment or other transaction. The present value of 1 table is used to...
Our Explanation of Present Value of an Ordinary Annuity uses the appropriate present value factors for discounting a stream of equal cash amounts occurring at equal time intervals. An important feature is the use of loan...
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