Is the installation labor for a new asset expensed or included in the cost of the asset? Accounting for Labor to Install Asset The definition of an asset’s cost is all costs that are necessary to get an asset in place...
Is the installation labor for a new asset expensed or included in the cost of the asset? Accounting for Labor to Install Asset The definition of an asset’s cost is all costs that are necessary to get an asset in place...
Is it okay to have negative amounts in the equity section of the balance sheet? Definition of Equity Section of the Balance Sheet The equity section of the balance sheet is known as: Owner’s equity if it is a sole...
If cash and a note are exchanged for a plant asset, is the amount of the note used in the depreciation calculation? A plant asset’s cost is depreciated, unless the asset is land. Cost is defined as the cash or cash...
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...
... In the investment section of the balance sheet In the stockholders' equity section of the balance sheet On the statement of comprehensive income View Coaching The repurchased (but not retired) shares of common...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
three accounts listed are permanent accounts since they are not closed at the end of the accounting year. TIP #1: All of the income statement accounts (revenues, expenses, gains, and losses) are temporary accounts since...
What is the break-even formula? Break-even Point in Units of Product The formula for determining the break-even point in units of product sold is: total fixed expenses divided by the contribution margin per unit. For...
In standard costing, how is the purchase price variance reclassified to arrive at actual cost? Definition of Purchase Price Variance In standard costing, the purchase price variance is the difference between the actual...
What is cost behavior? Definition of Cost Behavior Cost behavior is an indicator of how a cost will change in total when there is a change in some activity. In cost accounting and managerial accounting, three types of...
Why doesn't AccountingCoach.com classify the financial ratios? We avoided classifying the financial ratios because a financial ratio may overlap several classifications, and there are several different titles for the...
Isn't all overhead fixed? Not all overhead is fixed. Some manufacturing overhead costs, which are also referred to as indirect factory costs, are variable. A common example of a variable overhead cost is the electricity...
What is decentralization? Definition of Decentralization Decentralization refers to a company’s top management delegating authority to subunits or segments of the company such as a company consisting of a consumer...
What is yield to maturity? Definition of Yield to Maturity Yield to maturity is the total return that will be earned by someone who purchases a bond and holds it until its maturity date. The yield to maturity might also...
What is DCF? In accounting, DCF refers to discounted cash flows or to the discounted cash flow techniques such as net present value or internal rate of return. DCF is a preferred method for evaluating capital...
What is setup cost? Definition of Setup Cost In manufacturing, setup cost is the cost incurred to get equipment ready to process a different batch of goods. Hence, setup cost is regarded as a batch-level cost in activity...
What is a plant-wide overhead rate? Definition of Plant-wide Overhead Rate A plant-wide overhead rate is often a single rate per hour or a percentage of some cost that is used to allocate or assign a company’s...
What is standard costing? Definition of Standard Costing Standard costing is an accounting system used by some manufacturers to identify the differences or variances between: The actual costs of the goods that were...
What is the high-low method? Definition of High-Low Method The high-low method is a simple technique for determining the variable cost rate and the amount of fixed costs that are part of what’s referred to as a mixed...
What is a learning curve? Definition of Learning Curve A common learning curve shows that the cumulative average time to complete a manual task (in which learning is involved) will decrease 20% whenever the cumulative...
What is cost allocation? Definition of Cost Allocation Cost allocation is the assigning of a cost to several cost objects such as products or departments. The cost allocation is needed because the cost is not directly...
What is variance analysis? Definition of Variance Analysis In accounting, a variance is the difference between an actual amount and a budgeted, planned or past amount. Variance analysis is one step in the process of...
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,...
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...
What is the 13-point average for inventory? The 13-point average for inventory for the calendar year 2023 would be the sum of the following: (the inventory amount at December 31, 2022 plus the 12 end-of-the-month amounts...
What is a predetermined overhead rate? Definition of Predetermined Overhead Rate A predetermined overhead rate is often an annual rate used to assign or allocate indirect manufacturing costs to the goods it produces....
What is the price earnings ratio? The price earnings ratio, or P/E ratio, is the market price per share of common stock divided by the earnings per share of common stock. A corporation with a high price earnings ratio is...
What is benchmarking? Benchmarking is a process for improving some activity within an organization. We will illustrate benchmarking with the following example. Company Q has identified one of its activities that needs...
What is the dividend yield? The dividend yield is the annual cash dividend per share of common stock divided by the market price of a share of the common stock. Usually, fast growing corporations have a low dividend...
What is credit analysis and financial analysis? Credit analysis is associated with the decision to grant credit to a customer. It is also part of a bank’s lending procedures for making a loan and monitoring the...
What is direct labor? Definition of Direct Labor Direct labor refers to the employees and temporary staff who work directly on a manufacturer’s products. (People working in the production area, but not directly on the...
What does per annum mean? Definition of Per Annum Per annum means yearly or annually. It is a common phrase used to describe an interest rate. Often “per annum” is omitted, as in “I have a 4% mortgage loan.” or...
What causes an unfavorable fixed overhead budget variance? An unfavorable fixed overhead budget variance results when the actual amount spent on fixed manufacturing overhead costs exceeds the budgeted amount. The fixed...
What is marginal cost? Definition of Marginal Cost Marginal cost is a manufacturer’s cost to produce one more unit of product. In other words, marginal cost is the change in total costs when one additional unit is...
What is a service department? Definition of Service Department A service department is usually associated with a manufacturer’s production departments. However, a service department does not produce any of the...
What is a fixed cost? Definition of Fixed Cost A fixed cost is one that does not change in total within a reasonable range of activity. Since the fixed cost remains constant in total, the fixed cost per unit of activity...
What is the difference between normal costing and standard costing? Definition of Normal Costing Normal costing for manufactured products consists of following: Actual cost of materials Actual cost of direct labor...
How do we deal with a negative contribution margin ratio when calculating our break-even point? Definition of Negative Contribution Margin A negative contribution margin ratio indicates that a company’s variable costs...
How do you calculate Return on Capital Employed (ROCE)? Return on capital employed is used as a measurement of the performance of a division of a company. It assumes that the division is not responsible for its financing...
What is hurdle rate? Definition of Hurdle Rate In capital budgeting, the term hurdle rate is the minimum rate that a company wants to earn when investing in a project. Therefore, the hurdle rate is also referred to as...
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