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 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...
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...
A difference between an actual cost and a budgeted or standard cost, and the actual cost is the lesser amount. In the case of revenues, a favorable variance occurs when the actual revenues are greater than the budgeted...
total manufacturing overhead for the upcoming year by the expected total machine hours for the upcoming year. Let’s assume that the resulting plant-wide manufacturing overhead rate will be $30 per machine hour. The...
In standard costing the difference between the actual cost and the standard cost of direct materials or direct labor. The price variance of direct labor is usually referred to as the labor rate variance.
with the asset can be direct cost or an indirect cost or both a direct and indirect cost. Direct costs are traceable to a cost object (department, product, etc.) without any allocation. Indirect costs must be allocated...
Why does a cost system developed for inventory valuation distort product cost information? The cost system for inventory valuation may have been developed to provide a reasonable total cost of inventory and a reasonable...
to be $800,000 for the new year. The company produces similar products and it expects to use 20,000 machine hours. Based on this information, the company’s plant-wide overhead rate will be $40 per machine hour. If...
What is the meaning of pro rata? Pro rata is a Latin term that means in proportion. Pro rata is related to prorate, a term used in cost accounting. To illustrate the term pro rata, let’s assume that a company’s...
taxable income, it likely means lower income tax expense. Example Comparing LIFO and FIFO ABC Store purchases a product and then sells them to its retail customers. ABC began on January 2 and purchased 1 unit of product...
ending inventory and COGS will differ depending on a company’s cost flow assumption. Three examples of cost flow assumptions are: FIFO which assigns the recent unit costs of the purchases to inventory and the oldest...
To assign or allocate on a logical basis. For example, the materials price variance in a standard costing system is prorated to the following categories: materials inventory, work-in-process inventory, finished goods...
. Try another answer. 8. A company purchased items for inventory during 2023 at continuously higher costs. Its last two purchases of 2023 were 20 units on December 20 at a cost of $14 per unit and 30 units on December 30...
of the monetary unit assumption, accountants at a U.S. corporation do not hesitate to add the cost of a parcel of land purchased in 2024 to the cost of another parcel of land that had been purchased in 2004. (See...
run smoothly with the same amount of monthly fixed costs, which on average are approximately $200,000 per month for the cost of supervisors, rent, depreciation, and other fixed costs. However, if the manufacturer’s...
to be depreciated is $480,000 ($500,000 minus $20,000). Dividing the $480,000 by the machine’s useful life of 240,000 units, the depreciation will be $2 per unit. If the machine produces 10,000 units in the first...
to the change in the volume of activity A mixed cost is also referred to as a semivariable cost. A mixed cost is expressed by the algebraic formula y = a + bx, where: y is the total cost a is the fixed cost per period b...
that best matches the descriptions listed as items 6 - 16: Each principle or term can be used several times. conservatism cost economic entity full disclosure going concern industry practices matching materiality...
Can a cost be both a direct cost and an indirect cost? A cost can be both a direct cost and an indirect cost. One of many examples is the cost of a supervisor in a department within a factory. Let’s assume that Sam...
. The break-even point could be determined by using an electronic spreadsheet or by using a formula. The key is to determine how each of the company’s costs and expenses behave in order to compute the total amount of...
What is the difference between an invoice and a statement? Definition of an Invoice An invoice received from a supplier shows the items purchased, the cost per unit, the total cost or extension of each item, the total of...
of the quantities of every material used in the various steps of manufacturing each product or component part. Example of BOM Assume that a small company manufactures gourmet pies. There will be a bill of materials...
the amounts established at the time that the static budget was prepared and approved.) For costs that vary with volume or activity, the flexible budget will flex because the budget will include a variable rate per unit...
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,...
materials direct labor manufacturing overhead 14. Under conventional costing, the depreciation of the assembly line is a __________. Select... direct product cost general and administrative overhead expense component of...
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...
Our Explanation of Break-even Point illustrates how to determine the number of units or sales dollars that will result in zero net income. The techniques rely on a product's contribution margin or contribution margin...
What is the difference between FIFO and LIFO? Difference Between FIFO and LIFO The difference between FIFO and LIFO will exist only if the unit costs of a company’s products are increasing or decreasing. U.S. companies...
to product sales) additional cash payments or cash outflows of $750,000 (for payments related to the product line’s costs and expenses) These cash flows indicate that the net incremental cash flows are expected to be...
How do you compute a selling price if you know the cost and the required gross margin? Definition of Selling Price A selling price is the amount that a customer will pay to buy a product. If a retailer wants to earn a...
Should a manufacturer's selling prices be based on costs? A manufacturer’s selling prices should not be based on costs alone. One reason is that the actual cost of each product is not known with precision. At...
How do you calculate ending inventory? Physically Counting the Items in Inventory One method for calculating the cost of a company’s ending inventory is to 1) physically count the quantity of each of the items in...
price). Others will use the term gross margin ratio to mean the gross margin as percentage of sales or selling price. Example of Gross Margin If a retailer sells a product for $10, and its cost was $8, the gross profit...
The additional cost of an additional quantity. It is similar to marginal cost, except that marginal cost refers to the cost of the next unit. Incremental cost might be the additional cost from the next 200 units.
What is prime cost? Definition of Prime Cost In cost accounting, the prime cost of a manufactured product is the combination of the following: Direct materials cost Direct labor cost The indirect manufacturing costs...
The cost of the next unit.
If I want a gross margin of 25%, what percent should I mark up my product? Definition of Gross Margin Gross margin as a percentage is the gross profit divided by the selling price. For example, if a product sells for...
to the allocations (which are viewed as arbitrary), consider that changes in volume will affect a product’s cost. For example, if a company’s total fixed costs remain constant but its volume of products decreases by...
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