foregone by carrying out another alternative is the__________ cost. 5. A division’s profit minus a charge for its assets or capital employed is its __________ income. 6. The per unit selling price and purchase price...
foregone by carrying out another alternative is the__________ cost. 5. A division’s profit minus a charge for its assets or capital employed is its __________ income. 6. The per unit selling price and purchase price...
if the employees do not work in a manufacturing department. If the employee works in a manufacturing department, the amount of the FICA matching is recorded as part of the company’s manufacturing costs. You can find...
-digit account numbers, while large companies may use 6 or more digits in their account numbers. Other Comments The chart of accounts often reflects a company’s organization chart. With that arrangement, the internal...
overhead variances include the budget variance and the production __________ variance. 4. If manufacturing overhead is applied using the standard direct labor hours and the actual direct labor hours were more than...
A variance arising in a standard costing system that indicates the difference between the actual cost of direct materials and the standard cost of direct materials. Recognizing this variance at the time the direct...
A method of costing manufactured items that differs from normal costing and standard costing. Under actual costing each accounting period’s actual manufacturing overhead costs and each accounting period’s...
What is theoretical capacity? Theoretical capacity is the level of a manufacturer’s production that would be attained if all of its equipment and operations performed continuously at their optimum efficiency....
That part of a manufacturer’s inventory that is in the production process and has not yet been completed and transferred to the finished goods inventory. This account contains the cost of the direct material,...
A formula that calculates the optimum quantity to be purchased (or produced) so as to minimize the combined total cost of carrying inventory and processing additional purchase orders (or production setups). The formula...
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...
What is inventory? Definition of Inventory Inventory is a very significant current asset for retailers, distributors, and manufacturers. Inventory serves as a buffer between 1) a company’s sales of goods, and 2) its...
could be less than the cost of not filing a customer’s order on time or having to stop its production line. Example of Safety Stock Assume that a company uses the economic order quantity (EOQ) model to determine 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...
How is a voucher used in accounts payable? Definition of Voucher A voucher is often a prenumbered form used in the accounts payable department to standardize and enhance a company’s internal control over payments to...
What is a static budget? Definition of Static Budget A static budget is a budget in which the amounts will not change even with significant changes in volume. In contrast to a static budget, a company’s sales...
Is the sales tax paid on merchandise that you will resell an expense? I believe that most states have sales tax exemptions for merchandise purchased for resale. Check with your state’s sales tax department to see if...
What is an indirect cost? Definition of Indirect Cost An indirect cost is a cost that is not directly traceable to a cost object (product, department, etc.). Rather, the indirect cost is sometimes referred to as a common...
terms, where to remit payment, etc. Definition of a Voucher A voucher is an internal document used by a company’s accounts payable department in order to collect and organize the necessary documentation and approvals...
is expected to be useful for 5 years or the production of 100,000 units of output. The asset is placed into service on January 1, 2022, and the company’s accounting year is January 1 through December 31. Straight-Line...
Our Explanation of Standard Costing uses an easy-to-relate to example for illustrating a manufacturer's standard costs and variances. Also provided is a chart which indicates each variance, what it tells you, and where...
Our Explanation of Standard Costing uses an easy-to-relate to example for illustrating a manufacturer's standard costs and variances. Also provided is a chart which indicates each variance, what it tells you, and where...
What is the difference between a cost center and a profit center? Definition of Cost Center A cost center is a subunit of a company that is responsible only for its costs. A few examples of cost centers are: Production...
Usually the pay for the hours worked in excess of 40 hours per week. Federal laws require payment for these hours for employees who are not able to control their hours. For example, a company is required to pay a...
or the department in which the work is done. If the manufacturer were to use departmental manufacturing overhead rates, a separate rate for each department would be calculated. Let’s assume that the departmental...
Wrong. Direct labor is a specific, separate component of the manufacturing cost of a product. Indirect Labor Right! Indirect manufacturing labor is part of manufacturing overhead. Other examples of manufacturing...
Our Explanation of Payroll Accounting discusses the taxes and benefits which are withheld from employees' pay as well as the taxes and benefits that are expenses for the employers. Also provided are examples of the...
Why is the distinction between product costs and period costs important? The distinction between product costs and period costs is important to: Properly measure a company’s net income during the time specified on its...
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 the difference between product costs and period costs? A manufacturer’s product costs are the direct materials, direct labor, and manufacturing overhead used in making its products. (Manufacturing overhead is...
Why is a product that sells for $50 reported in inventory at its cost of $40? Generally, items in inventory are valued at their cost—not their selling prices—because of the cost principle. Another reason for not...
of the manufacturing costs are not directly traceable to individual products and will need to be allocated to them. Examples of indirect manufacturing costs include the rent, property taxes, depreciation, heat,...
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.
referred to as a __________–__________ cost. 5. The additional quantity of inventory held by a company so that it will not run out of stock when there is an unexpected increase in demand for its product is known as...
increases when the volume decreases. Examples of Fixed Costs Assume the rent for a production facility is a fixed cost of $120,000 per year and there are normally 30,000 machine hours of good output during a year. At...
What is a variable expense? Definition of Variable Expense An expense is variable when its total amount changes in proportion to the change in sales, production, or some other activity. In other words, a variable expense...
What is a fixed expense? Definition of Fixed Expense A fixed expense is an expense whose total amount does not change when there is an increase in an activity such as sales or production. The words within a relevant or...
What is scrap value? Definition of Scrap Value In cost accounting, scrap value refers to a relatively insignificant amount that a manufacturer receives from the sale of production materials that remain after the...
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