See fixed expenses.
See fixed expenses.
Also referred to as factory burden, factory overhead, indirect manufacturing costs, and manufacturing support costs. To learn more, see Explanation of Manufacturing Overhead.
See mixed expenses.
The combination of direct materials and direct labor.
Direct materials, direct labor and manufacturing overhead costs. Also referred to as product costs, production costs, and inventoriable costs.
with U.S. GAAP. The resulting unit costs are used for inventory valuation and for the calculation of the cost of goods sold. Example of Manufacturing Costs Manufacturing costs are typically divided into three...
The allocation of manufacturing overhead (indirect manufacturing costs) to products on the basis of a volume metric such as direct labor hours or production machine hours. As manufacturing becomes more sophisticated the...
R & D costs. These are costs incurred to develop new products or processes that may or may not result in commercially viable items. The general rule is that research and development costs are to be expensed...
What are production costs? Definition of Production Costs In managerial accounting and cost accounting, production costs are the costs that occur in the manufacturing facilities. Production costs are also referred to as...
See inventory carrying costs.
The actual cost of direct materials, the actual cost of direct labor, and manufacturing overhead applied by using a predetermined annual overhead rate.
What are conversion costs? Definition of Conversion Costs Conversion costs is a term used in cost accounting that represents the combination of direct labor costs and manufacturing overhead costs. In other words,...
In the EOQ model, the holding costs are the incremental costs of storing or holding an item in inventory for one year.
The cost accounting system where similar units are mass produced. Costs are collected by department and are then assigned to the units produced.
for further processing are referred to as __________–__________ units by Department A. 5. Department A’s costs for the units it sent to Department B are referred to as __________–__________ costs by Department B....
The cost accounting system where costs are recorded by individual job (versus process costing system). The job order system can use standard costs or actual costs.
Costs that are common to several products, processes, activities, departments, territories, etc. Often common costs are subsequently allocated to each of the joint products, joint processes, etc. in order to determine...
. With standard costing, the general ledger accounts for inventories and the cost of goods sold contain the standard costs of the inputs that should have been used to make the actual good output. Differences between the...
See bond issue costs.
state that the products have __________ the manufacturing overhead costs. 3. The three main classifications of costs in the job cost records are direct __________, direct labor, and manufacturing overhead. 4. In...
Bond Issue Costs is a contra liability accounts reported along with Bonds Payable. Bond Issue Costs include the professional fees and registration fees associated with the issuance of bonds. The amount in the account...
The cost to hold an item in inventory. Includes the cost of capital tied up in inventory, the cost of space and insurance, and the cost of items becoming obsolete while being held in inventory. This is an important...
Assigning more manufacturing overhead to production than the amount that was actually incurred.
In the EOQ model, order costs are the incremental costs of processing an order of goods from a supplier. Examples of order costs include the costs of preparing a requisition, a purchase order, and a receiving ticket,...
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 are inventoriable costs? Definition of Inventoriable Costs Inventoriable costs are: A retailer’s cost of the goods (products) that it purchased for resale, and any additional cost to get the goods in place and...
Usually refers to manufacturing overhead costs such as factory supplies, factory depreciation, indirect factory labor, etc. To learn more, see Explanation of Manufacturing Overhead.
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...
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...
to the products or to the cost of inventory. The period costs are usually associated with the selling function of the business or its general administration. The period costs are reported as expenses in the accounting...
What is the difference between prime costs and conversion costs? Cost Categories of a Manufactured Product Prime costs and conversion costs pertain to the three cost categories of a manufactured product: Direct materials...
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...
as an asset and expensed later. To defer the cost to the balance sheet is to capitalize the costs. Examples of Costs Being Expensed Costs are reported as expenses in the accounting period when they are used up, have...
Why use normal costing instead of actual costing? Definition of Normal Costing For a manufacturer, normal costing means assigning the following costs to the actual goods produced each month: Actual direct materials...
... Balance sheet only Income statement only Statement of cash flows only Both the balance sheet and the income statement View Coaching The inventory turnover ratio is the cost of goods sold for the year divided by the...
to the retailers. Obviously its turnover ratios will be less impressive than the ratios of the first company. A company’s management is another variable that explains differences in the profit margin and turnover...
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...
that explains how the amount of cash and cash equivalents has changed during an accounting period is the statement of __________ __________. 15. Sales minus the cost of goods sold is the __________ profit. 16. Sales...
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...
A technique for allocating costs to a product, service, customer, etc. The premise is that activities cause an organization to incur costs. Once the costs of the activities have been identified and each activity’s...
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