An additional quantity of items held in inventory in order to minimize the chance of an item being out of stock.
An additional quantity of items held in inventory in order to minimize the chance of an item being out of stock.
This is the sum of the beginning inventory of merchandise plus the net cost of the merchandise purchased including freight-in.
A cost flow assumption where the first (oldest) costs are assumed to flow out first. This means the latest (recent) costs remain on hand. To learn more, see Explanation of Inventory and Cost of Goods Sold.
In the EOQ model, the holding costs are the incremental costs of storing or holding an item in inventory for one year.
This is a record on an individual job (product, batch) within the job costing system. For items in process this is a subsidiary record to the general ledger account inventory: work-in-process (WIP).
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...
Financial ratios such as current ratio, quick ratio, receivables turnover ratio, and inventory turnover ratio. To learn more, see Explanation of Financial Ratios
balance This is the right side of an account and also the normal balance for liability, stockholders’ equity, revenue, and gain accounts. Mark as wrong Mark as right expenses Under the accrual method, the accounts for...
) and you are confident that the dollar amounts are related to the activity on the x-axis, you can proceed. One technique is the High-Low method. This method uses only two of the points or months on your graph: the point...
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...
Our Explanation of Manufacturing Overhead gives you examples of what is included in manufacturing overhead. You will learn that these are indirect product costs and therefore are allocated to the products in order to...
Our Explanation of Activity Based Costing illustrates how manufacturing overhead costs for a product will differ when costs are allocated using only the number of machine hours, as opposed to being allocated using the...
Under the accrual method of accounting, the account Salaries Expense reports the salaries that employees have earned during the period indicated in the heading of the income statement, whether or not the company has yet...
Under the accrual method of accounting, this account reports the employer’s portion of the Social Security and Medicare tax that pertains to the period indicated in the heading of the income statement, whether or...
Under the accrual method of accounting, this account reports the amount of holiday pay, vacation pay, and sick day pay that the warehouse employees have earned during the accounting period indicated in the heading of the...
Should a company focus on cash flows or accounting profits when making a capital expenditure decision? Using the incremental cash flows and discounting them to reflect the time value of money is the preferred method. The...
A measurement of net income arrived at by comparing the amount of total equity at the end of a period to the amount of total equity at the beginning of the period. For example, if Al Capone had $5 million of equity at...
Under the accrual method of accounting, this account reports the amount of holiday pay, vacation pay, and sick day pay that the delivery employees have earned during the accounting period indicated in the heading of the...
Under the accrual method of accounting, this account reports the employer’s portion of the health insurance cost incurred by the company during the period indicated in the heading of the income statement, whether...
Under the accrual method of accounting, this account reports the employer’s portion of the health insurance cost incurred by the company during the period indicated in the heading of the income statement, whether...
If a mortgage payment is due by December 31, but the payment is not made until the following month, should the loan payment be accrued at December 31? The interest portion of the mortgage payment should be accrued as of...
Where is treasury stock reported on the balance sheet? Under the cost method of recording treasury stock, the cost of treasury stock is reported at the end of the Stockholders’ Equity section of the balance sheet....
A government index that tracks the changes in prices in order to measure general inflation. This index can be used by small companies to obtain the benefits of LIFO without tracking individual units in inventory. See the...
Often a U-shaped arrangement of the various machines involved in manufacturing a product. This layout eliminates the need to move the item being manufactured from one area or department of the factory to another. In...
Terms indicating that the buyer must pay to get the goods delivered. (The buyer will record freight-in and the seller will not have any delivery expense.) With terms of FOB shipping point the title to the goods usually...
The amount needed to replace an asset such as inventory, equipment, buildings, etc. If an asset’s replacement cost is greater than the asset’s carrying amount, the cost principle prohibits the use of the...
The temporary contra purchases account used in a periodic inventory system which represents the amounts of merchandise that were returned to suppliers and the amounts allowed as deductions by suppliers for goods not...
In accounting, cost is defined as the cash amount (or the cash equivalent) given up for an asset. Cost includes all costs necessary to get an asset in place and ready for use. For example, the cost of an item in...
of the factors used in calculating the reorder point of items carried in inventory. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career...
Terms indicating that the seller will incur the delivery expense to get the goods to the destination. With terms of FOB destination the title to the goods usually passes from the seller to the buyer at the destination....
This is a non-operating or “other” item resulting from the sale of an asset (other than inventory) for more than the amount shown in the company’s accounting records. The gain is the difference between...
In the context of inventory, net realizable value or NRV is the expected selling price in the ordinary course of business minus the costs of completion, disposal, and transportation. In the context of accounts receivable...
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...
Gains result from the sale of an asset (other than inventory). A gain is measured by the proceeds from the sale minus the amount shown on the company’s books. Since the gain is outside of the main activity of a...
The process of becoming outdated or no longer being economically feasible (often caused by technology advances). For example, personal computers and computer chips from 2010 are obsolete even though they can be operated....
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...
The temporary contra purchases account used in a periodic inventory system which represents the discounts allowed by paying within prescribed credit terms such as 1/10 (1% can be deducted from the amount owed if paid...
A temporary account used in the periodic inventory system to record the purchases of merchandise for resale. (Purchases of equipment or supplies are not recorded in the purchases account.) This account reports the gross...
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