Is the cost of goods sold an expense? Why the Cost of Goods Sold is an Expense We often think of expenses as salaries, advertising, rent, commissions, interest, and so on. However, the cost of goods sold is also an...
Is the cost of goods sold an expense? Why the Cost of Goods Sold is an Expense We often think of expenses as salaries, advertising, rent, commissions, interest, and so on. However, the cost of goods sold is also an...
The analysis of how profits change as volume changes. The calculation of the break-even point is a part of cost-volume-profit analysis.
What is the cost of goods sold? Definition of Cost of Goods Sold The cost of goods sold is the cost of the products that a retailer, distributor, or manufacturer has sold. The cost of goods sold is reported on the income...
, as it is also the average cost to retail ratio. The following caculation pertains to the period of January 1 to January 28: *$20,000 at retail times $27,000/$36,000 $16,000 Wrong. See the calculations for $15,000....
What are cost flow assumptions? Definition of Cost Flow Assumptions The term cost flow assumptions refers to the manner in which costs are removed from a company’s inventory and are reported as the cost of goods sold....
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...
Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
To learn more, see our Financial Ratios Outline.
An income statement that subtracts all variable costs and expenses from revenues in order to show the contribution margin. From that is subtracted the fixed costs and expenses to arrive at net income. To learn more, see...
: Divide company’s net credit sales for the year by 360 or 365 days = average credit sales per day Divide the average balance in Accounts Receivable during the year by #1 An alternative calculation is to use the...
is also referred to as the days’ sales in accounts receivable. Formula for Calculating the Average Collection Period One formula for calculating the average collection period is: 365 days in a year divided by the...
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...
are FOB __________. 6. FIFO is an inventory __________ __________ assumption. 7. When a company uses FIFO, its inventory might be reported at the lower of __________ or __________ __________ __________. 8. The inventory...
to +1 (“0” indicates no correlation and “1” indicates perfect correlation). Measuring the correlation between variables can be helpful, but a high degree of correlation does not guarantee that a change in one...
What is the return on stockholders' equity (after tax) ratio? Definition of Return on Stockholders’ Equity The financial ratio return on stockholders’ equity (or return on equity) is calculated by dividing a...
-term assets. Similarly, current liabilities are reported in a section that is separate from long-term liabilities. This allows bankers, owners, and others to easily compute the amount of an organization’s working...
because U.S. accounting principles and income tax regulations require manufacturers to follow full absorption costing. This means that the cost of manufactured goods must include the costs of the direct 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...
as the __________ __________ __________ sold. 20. The annual cost of goods sold divided by the average inventory during the year is the formula for the inventory __________ ratio. Any questions left unanswered will be...
the actual cost per unit (pounds, gallons, etc.) and the standard cost per unit Materials Usage or Quantity Variance which reports the difference between the actual quantity of the materials used and the standard...
What do overabsorbed and underabsorbed mean? Definition of Overabsorbed and Underabsorbed In cost accounting, overabsorbed and underabsorbed pertain to a manufacturer’s manufacturing overhead costs. The manufacturing...
of contribution margin: selling price minus the variable costs and expenses. Once the contribution margins have covered the total amount of fixed costs and expenses, the entire contribution margin on the next...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
A financial ratio that compares a company’s interest expense to the company’s income before interest expense and income taxes. It is an indicator of the likelihood that interest payments will be made in the...
Financial Statements Video Training Part 8 Balance sheet: working capital, current ratio, financial leverage, notes to financial statements, comparative balance sheets Must-Watch Video Learn How to Advance Your...
The result of dividing a corporation’s net income by the average amount of common stockholders’ equity during the time interval when the net income was earned. To learn more about this ratio, see Explanation...
What is gross margin? Definition of Gross Margin Gross margin is the amount remaining after a retailer or manufacturer subtracts its cost of goods sold from its net sales. In other words, gross margin is the retailer’s...
Inventory and Cost of Goods Sold Inventory Inventory is usually the most significant current asset of a retailer or manufacturer. Generally, inventory is reported on the balance sheet at its cost (or lower). When the...
Is the rental cost of a building considered overhead? Definition of Rent as Overhead The rental cost of a building used in manufacturing is part of manufacturing overhead. Manufacturing overhead is assigned or allocated...
A predetermined dollar amount that a pound of material or an hour of labor should cost during an accounting period.
Are transportation-in costs part of the cost of goods sold? Definition of Transportation-in Costs Transportation-in costs, which are also known as freight-in costs, are part of the cost of goods purchased. The reason is...
What is the difference between cost and expense? Definition of Cost A cost might be an expense or it might be an asset. Definition of Expense An expense is a cost that has expired or was necessary in order to earn...
Should inventories be reported at their cost or at their selling prices? Definition of Inventory Cost Inventories are reported at cost, not at selling prices. A retailer’s inventory cost is the cost to purchase the...
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