What is credit analysis and financial analysis? Credit analysis is associated with the decision to grant credit to a customer. It is also part of a bank’s lending procedures for making a loan and monitoring the...
What is credit analysis and financial analysis? Credit analysis is associated with the decision to grant credit to a customer. It is also part of a bank’s lending procedures for making a loan and monitoring the...
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...
What is the 13-point average for inventory? The 13-point average for inventory for the calendar year 2023 would be the sum of the following: (the inventory amount at December 31, 2022 plus the 12 end-of-the-month amounts...
What is the break-even formula? Break-even Point in Units of Product The formula for determining the break-even point in units of product sold is: total fixed expenses divided by the contribution margin per unit. For...
What is the weakness of traditional cost allocations? Traditional cost allocations are often based on volume such as number of products manufactured, number of direct labor hours, number of production machine hours,...
What is decentralization? Definition of Decentralization Decentralization refers to a company’s top management delegating authority to subunits or segments of the company such as a company consisting of a consumer...
Isn't all overhead fixed? Not all overhead is fixed. Some manufacturing overhead costs, which are also referred to as indirect factory costs, are variable. A common example of a variable overhead cost is the electricity...
In standard costing, how is the purchase price variance reclassified to arrive at actual cost? Definition of Purchase Price Variance In standard costing, the purchase price variance is the difference between the actual...
What is the coefficient of determination? The coefficient of determination is a statistic which indicates the percentage change in the amount of the dependent variable that is “explained by” the changes in the...
What is variance analysis? Definition of Variance Analysis In accounting, a variance is the difference between an actual amount and a budgeted, planned or past amount. Variance analysis is one step in the process of...
What is standard costing? Definition of Standard Costing Standard costing is an accounting system used by some manufacturers to identify the differences or variances between: The actual costs of the goods that were...
What is the high-low method? Definition of High-Low Method The high-low method is a simple technique for determining the variable cost rate and the amount of fixed costs that are part of what’s referred to as a mixed...
What is a budget? A budget is a financial plan for future activities. The budgets used in business often include a sales or revenues budget detailed by products or services, production budgets, budgets for each...
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....
Why doesn't AccountingCoach.com classify the financial ratios? We avoided classifying the financial ratios because a financial ratio may overlap several classifications, and there are several different titles for the...
Why would the cost behavior change outside of the relevant range of activity? Cost behavior often changes outside of the relevant range of activity due to a change in the fixed costs. When volume increases to a certain...
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...
What is cost allocation? Definition of Cost Allocation Cost allocation is the assigning of a cost to several cost objects such as products or departments. The cost allocation is needed because the cost is not directly...
What is the price earnings ratio? The price earnings ratio, or P/E ratio, is the market price per share of common stock divided by the earnings per share of common stock. A corporation with a high price earnings ratio is...
What is cost behavior? Definition of Cost Behavior Cost behavior is an indicator of how a cost will change in total when there is a change in some activity. In cost accounting and managerial accounting, three types of...
What is benchmarking? Benchmarking is a process for improving some activity within an organization. We will illustrate benchmarking with the following example. Company Q has identified one of its activities that needs...
of production method, let’s assume that a company has a machine with a cost of $500,000 and a useful life that is expected to end after producing 240,000 units of a component part. Further, the machine’s salvage...
What are direct costs? Definition of Direct Costs Direct costs are directly traceable to a cost object such as a product or a department. In other words, direct costs do not have to be allocated to a product, department,...
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...
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...
What is a learning curve? Definition of Learning Curve A common learning curve shows that the cumulative average time to complete a manual task (in which learning is involved) will decrease 20% whenever the cumulative...
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...
What is the dividend yield? The dividend yield is the annual cash dividend per share of common stock divided by the market price of a share of the common stock. Usually, fast growing corporations have a low dividend...
What is the coefficient of correlation? Definition of Coefficient of Correlation In simple linear regression analysis, the coefficient of correlation (or correlation coefficient) is a statistic which indicates an...
to approximately $2,000 in 6 years (6 X 12 = 72; or 72/12 = 6). If the $2,000 continues to earn 12% each year, six years later the investment will be worth $4,000. If the investment continues to earn 12% per year,...
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
and patents are examples of __________ assets. 10. The cost of equipment used in a business minus its accumulated depreciation is the equipment’s __________ value or carrying value. 11. The main purpose of...
balance sheet account (or) permanent account (or) real account This type of account is present in every adjusting entry along with an income statement account. balance sheet account (or) permanent account (or) real...
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...
is the __________ __________. 3. Generally a __________ asset is one that will turn to cash or will be used up within one year of the balance sheet date. 4. Plant assets used in the business are reported under the...
may encounter a cash flow problem and/or losses due to obsolescence. Inventory also means some accounting complexities due to the changing costs of the items in inventory. Cost of Goods Sold For a retailer or...
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...
(or to its estimated salvage value). Example of Reporting a Fully Depreciated Asset on the Balance Sheet A fully depreciated asset that continues to be used is reported at its cost in the Property, Plant and Equipment...
and finished goods. The notes to the financial statements will also described how the manufacturer’s inventory is valued. For example, the notes will disclose whether FIFO lower of cost or net realizable value, LIFO,...
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