of inventory so that it can meet the fluctuating demand of its customers, avoid disruptions in production, and minimize holding costs. Since the costs of the items purchased or produced are likely to change (especially...
of inventory so that it can meet the fluctuating demand of its customers, avoid disruptions in production, and minimize holding costs. Since the costs of the items purchased or produced are likely to change (especially...
solely by the employer company: federal unemployment taxes (FUTA) and state unemployment taxes The employer/company’s portion (the matching portion) of the following payroll taxes: Social Security and Medicare...
, if gross sales are 990 and sales returns are 10, sales allowances are 5, and sales discounts 20, the net sales are 955 (990 minus 35). Here are some additional examples of net: net realizable value. The amount to be...
Is contribution margin the same as operating income? Definition of Contribution Margin Contribution margin is defined as revenues minus the variable costs and variable expenses. Example of Contribution Margin Assume that...
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
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...
and the deferral of some costs to a future accounting period. Select... conservatism cost economic entity full disclosure going concern industry practices matching materiality monetary unit time period 16. Assumption...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
Do variance accounts have an impact on financial statements? Or are they for performance evaluation only? Since the financial statements must reflect the cost principle, both the standard costs and the variances must be...
Also referred to as SG&A. For a manufacturer these are expenses outside of the manufacturing function. (However, interest expense and other nonoperating expenses are not included; they are reported separately.)...
The costs incurred to bring an asset back to an earlier condition or to keep the asset operating at its present condition (as opposed to improving the asset). For example, if a company truck is damaged, the cost to...
What is an outlier? In cost accounting, an outlier could be a cost or its related level of activity that is out of line with other observations. An outlier can be detected by plotting each observation’s cost and...
The result of a corporation buying back its own bonds for an amount that is less than the carrying value of the bonds. The amount of the gain is computed by subtracting the amount spent to repurchase the bonds from the...
than the cost of goods sold. They are period expenses as opposed to product costs. SG&A (or) selling, general and administrative These are a company’s operating expenses other than the cost of goods sold. They are...
Our Explanation of Improving Profits will assist you in focusing on the costs and revenues that are relevant (and ignoring those which are not relevant) for improving profits and eliminating losses. Examples of the...
What is a fringe benefit rate? Definition of Fringe Benefit Rate A fringe benefit rate is a percentage that results from dividing the cost of an employee’s fringe benefits by the wages paid to the employee for the...
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 reasonable range of activity. Learn more about fixed costs What is a variable expense? An expense is variable when its total amount changes in proportion to the change in sales, production, or some other activity....
What is gross margin? Definition of Gross Margin Gross margin is the amount remaining after a retailer or manufacturer subtracts its cost of goods sold from its net sales. In other words, gross margin is the retailer’s...
. PERIOD PRDEOI Unscramble PERIOD EOIRPD Unscramble 6. The amounts earned from a company's main activities. REVENUES VNEERSEU Unscramble REVENUES UNEVRESE Unscramble 7. The costs that are matched with revenues....
for packaging, sales commissions, and shipping. Therefore, the net realizable value of the inventory is $12,000 (selling price of $14,000 minus $2,000 of costs to dispose of the goods). In that situation the inventory...
Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
&A (or) selling, general and administrative These are a company’s operating expenses other than the cost of goods sold. They are also period costs (as opposed to product costs). SG&A (or) selling, general and...
in which the expenses occur. Hence, SG&A expenses are said to be period costs as opposed to being part of a product’s cost. Since SG&A expenses are not a product cost, they are not assigned to the cost of...
What is managerial accounting? Definition of Managerial Accounting Managerial accounting is also known as management accounting and it includes many of the topics that are included in cost accounting. Some of the...
that has its cost of $50,000 in its account entitled Truck. The associated account Accumulated Depreciation has a credit balance of $43,000. The truck’s carry amount or book value is $7,000. A corporation has Bonds...
How do you calculate an asset's salvage value? Definition of Asset Salvage Value In accounting, an asset’s salvage value is the estimated amount that a company will receive at the end of a plant asset’s useful...
to describe the amount that it is subtracting from its sales revenue to report the amount of its gross profit or gross margin. Companies that provide services will use the term cost of services or cost of service...
: To have cash available for unforeseen events and for increases in its costs To reduce its long-term debt or repurchase shares of its common stock To increase inventory to expand, to purchase in larger quantities for...
for one of its customers. Periodicity allows the manufacturer to divide the manufacturing costs of the machine into the 24 monthly periods covered by the contract. Periodicity also allows the manufacturer to report the...
costs must be reported as Advertising Expense at the time the ads are run. A prepayment of the cost of ads that will air in the future should be recorded in a current asset account such as Prepaid Advertising. When the...
, but the vendors’ invoices have not yet been recorded in Accounts Payable Accrued employee wages and fringe benefits Accrued management bonuses Accrued interest on loans payable Accrued advertising and promotion...
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...
with a reseller’s certificate, which allows the supplier to not charge the sales tax. If a sales tax is paid by the reseller and the sales tax could have been avoided, the sales tax would have to be expensed...
realizable value (NRV) that is less than the cost of the inventory, it may choose to keep the original costs in its Inventory account and to reduce the reported amount of inventory through a contra inventory account...
the perpetual inventory system, the cost of inventory items purchased are recorded directly into the account Inventory. Under the perpetual system, the costs of the goods sold are removed from the account Inventory when...
What is carriage outwards? Definition of Carriage Outwards Carriage outwards refers to the transportation costs that a seller must pay when it sells merchandise with the terms FOB Destination. Carriage outwards is also...
, accountants might state “we need to get a proper “cut-off” between the end-of-the-month transactions and those that belong in the following month. If a company sells goods and has inventories, its monthly close...
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