to calculate a retailer’s cost of goods sold is to begin with the cost of the goods it had purchased during the accounting period and then adjust it for the change in inventory. For example, if 1,000 units of a...
to calculate a retailer’s cost of goods sold is to begin with the cost of the goods it had purchased during the accounting period and then adjust it for the change in inventory. For example, if 1,000 units of a...
ownership of the unit to the lessee (tenant) at the end of the one-year lease. Another lease might involve a business leasing a forklift from a forklift dealer. This lease states that it is noncancelable and requires 60...
by the employer is $17,000 for the year. Dividing the annual fringe benefits cost of $17,000 by the employee’s $37,600 of wages for the hours worked, results in a fringe benefit rate of 45.2%. Therefore, when a...
year for 5 years. Download our Straight-line Method Form and Template. Units-of-Production Method Depreciable cost of $90,000 divided by 100,000 units = $0.90 per unit. In 2022, the company produces 12,000 units X $0.90...
Costs that have been divided up and assigned to periods, departments, products, etc. In depreciation it is the asset’s cost that is assigned to each of the years that the asset is in use. In cost accounting it is...
A factory or manufacturing overhead rate used to allocate, apply, assign, or spread indirect product costs to items manufactured. Under traditional cost accounting, the burden rate might be a percentage of direct labor...
valuable. (Think Apple, Coke, Nike, etc.) Due to the cost principle, the balance sheet may be reporting trademarks at close to $0. Examples of Trademarks on the Balance Sheet Assume that Company X, a consumer products...
are considered to be a product cost and will be allocated or assigned to the goods produced. The allocated depreciation will be included in the inventory cost of the goods manufactured until the goods are sold. When the...
costs, burden, indirect manufacturing costs, and indirect product costs. Since manufacturing overhead is an indirect product cost, it needs to be allocated or assigned to the products manufactured and will cling to the...
Our Explanation of Future Value of a Single Amount will show you the power of compounded interest on a single deposit. You will see how the future value tables can be useful as well as the rule of 72.
are considered to be operating expenses and are presented on the income statement as SG&A expenses. (SG&A is the acronym for selling, general and administrative expenses.) Sales commissions are not part of the...
that is subtracted from the sales revenues on the income statement. For simplicity, assume that a company has only one product and during the year it sold 50,400 units at a selling price of $10 each. Also assume that...
and detailed accounting standards found in the Financial Accounting Standards Board (FASB) electronic search system known as the Accounting Standards Codification. The following are some of the underlying concepts,...
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...
The symbol for the number of units of product, number of machine hours, or other indicator of activity or volume as shown in the equation of the cost line y = a + bx.
Costing system wherein fixed manufacturing overhead is allocated to (or absorbed by) products being manufactured. This system, which treats fixed manufacturing costs as a product cost, is required for external financial...
To assign costs to a product, department, customer, etc. on an arbitrary basis. For example, the heating cost might be allocated to the five departments located in the area that is heated. The allocation is often based...
A method used by retailers for estimating the cost of ending inventory without tracking the individual units of product.
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).
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...
equipment manufacturer with a high demand product that takes six months to manufacture. If this manufacturer has few or no competitors, a great product, and an excellent reputation for service, its profit margin can be...
of product first, but can remove from inventory the cost of the most recently purchased items. Example of LIFO Assume that a corporation uses LIFO and has three units of a product in its inventory. Due to its supplier...
Withholdings for Health Insurance Assume that the cost of a company’s health insurance plan is $300 per biweekly pay period and that the employee is responsible for paying 25% of the cost through payroll withholding....
a net cost of $7,000 per year on the $100,000 loan. This means the after-tax cost is 7% ($7,000 divided by $100,000) per year. Using the example above, the after-tax interest rate can also be calculated. The formula for...
the wages and fringe benefits of the direct labor employees and the cost of the temporary staff that are working directly on the manufacturer’s products. The direct labor cost is classified as the following: A product...
principle Economic entity assumption monetary unit assumption Time period assumption Going concern assumption Constraints such as materiality and conservatism Qualities such as reliability, relevance, consistency,...
Why would the cost behavior change outside of the relevant range of activity? Cost behavior often changes outside of the relevant range of activity due to a change in the fixed costs. When volume increases to a certain...
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
What is burn rate? In business, burn rate is usually the monthly amount of cash spent in the early years of a start-up business. Burn rate is an important metric since the new business must spend time and money...
&A) expenses are a company’s operating expenses (along with the cost of goods sold). SG&A expenses are not considered to be product costs and therefore are not inventoriable costs. Rather, SG&A expenses are...
on the independent variable. Let’s illustrate this by looking at the cost of property insurance. The cost of insuring the factory building is a fixed cost when the independent variable is the number of units...
other costly activities). If another product requires no additional activities other than having the production machine run 24 hours a day, the product will be assigned lots of overhead costs (even though it required no...
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...
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...
hour. This means that when the machine is not running, the company is missing the opportunity to earn a contribution of $140 per machine hour. During the 4-hour setup time, the company is...
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