A phrase used in standard costing. The production that is acceptable (not rejected products) and which is assigned manufacturing costs of direct materials, direct labor, and manufacturing overhead.
A phrase used in standard costing. The production that is acceptable (not rejected products) and which is assigned manufacturing costs of direct materials, direct labor, and manufacturing overhead.
A term used with standard costs to report a difference between actual costs and standard costs. To learn more, see Explanation of Standard Costing.
words, the goal of ERP is to have one integrated system for the entire company. The integration of all of a company’s information from all departments, processes, operations, etc. requires that an ERP system be very...
Statement Assume that an online seller begins operations on January 2 by purchasing $5,000 of goods consisting of 1,000 items which cost $5 each. The goods are going to be sold for $12 each. There are two common ways to...
is to calculate the ending inventory by using the quantities on the company’s inventory system. Those quantities are multiplied by the actual unit costs that reflect the company’s cost flow assumption. (Throughout...
to as the optimum lot size. The formula to calculate the economic order quantity (EOQ) is the square root of [(2 times the annual demand in units times the incremental cost to process an order) divided by (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...
See inventory: work-in-process (WIP).
See inventory: work-in-process (WIP).
be combined, such as raw materials and supplies, or raw materials and work-in-process. In addition, a manufacturer (and others with inventory) should disclose the method for valuing the inventory. This includes whether...
of the remaining 85% would be counted every month. Cycle counting reduces the need for the costly process of shutting down the manufacturing process in order to count inventory. Cycle counting can also result in more...
the company sells or retires the asset. Fully depreciated assets and their resulting book value of zero (or its salvage value) reinforces accountants’ position that depreciation is a process for allocating an...
What are byproducts? Byproducts, or by-products, are products with relatively little value that emerge from a common process along with the main products. The main products have significant value and are referred to as...
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...
The field of study within accounting that is devoted to information needed by the management of the company (as opposed to financial accounting to external parties). Topics covered in managerial accounting include cost...
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...
In standard costing, the quantity variance could be the direct materials’ usage variance or the direct labor’s efficiency variance. The quantity variance is the difference between the quantity of inputs that...
Our visual tutorial for the topic Accounting Equation shows how the double-entry system keeps the accounting equation in balance. It also lets you see the connection between the income statement and the balance sheet.
for inventory valuation purposes.) 6. Manufacturing overhead must be assigned to both work-in-process inventory and finished goods inventory for external financial reporting purposes. True Right! False Wrong. 7. Only...
the inventory items in place and ready for sale.) The cost may vary somewhat since U.S. companies may choose between the periodic inventory system and the perpetual inventory system. In addition, these companies may...
materials and direct labor) will be part of the cost of the items in inventory and the cost of the items sold. Accountants refer to this as full absorption costing. Accountants will also say that the manufactured goods...
One component of a manufacturer’s inventory. Sometimes referred to as Stores or Raw Materials. (Other components of a manufacturer’s inventory are work-in-process and finished goods.)
The point at which several products emerge from a common process.
Bookkeeping Video Training Part 12 Bank reconciliation: process to determine the true or adjusted amount of cash, journal entries needed for adjustments to book balance Must-Watch Video Learn How to Advance Your...
The accounting focused on determining the cost per unit of a manufacturer in order to value inventory and cost of goods sold. It is also used to determine unit costs of items processed in service businesses, such as a...
A product that emerges with other products in a common process; however, this product does not have a significant value. (If it had significant value, it would be a joint product.)
A common cost. Often refers to the costs prior to the point where several products emerge from a common process.
A process which discounts future cash flows to the present in order to reflect the time value of money. Examples of the discounted cash flow model are net present value and internal rate of return.
Scrap or waste that should have been avoided. In other words, abnormal spoilage is the amount that is over and above the normal amount that is expected in a production process.
The products with significant value that emerge at a split-off point in a process. When a joint product has little value it is referred to as a by-product.
be on hand based on the accounting information. Examples of Determining the Cost of Missing Inventory If a company’s accounting records or its inventory system uses the perpetual inventory system (and it is maintained...
balance sheet. Examples of Book Value Calculations If a company’s computer system had a cost of $300,000 and it has accumulated depreciation of $80,000, the computer system has a book value of $220,000. If a company...
), and Income statement accounts (revenues, expenses, gains, losses) Under the double entry system of accounting and bookkeeping, every business transaction will affect two (or more) general ledger accounts. In addition,...
See perpetual system of inventory.
See perpetual system of inventory.
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