Fundamentals of Financial Accounting
Terms and Definitions
Terms and Definitions
Fichier Détails
| Cartes-fiches | 26 |
|---|---|
| Langue | English |
| Catégorie | Finances |
| Niveau | Université |
| Crée / Actualisé | 29.05.2014 / 07.01.2024 |
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Opprtunity Cost
A benefit, profit, or value of something that must be given up to acquire or achieve something else. Since every resource (land, money, time, etc.) can be put to alternative uses, every action, choice, or decision has an associated opportunity cost.
Contribution Analysis
Estimating the selling prices and the direct (variable) costs of a range of products, to compute the extent to which each unit sold will pay for indirect (fixed) costs and contribute to the net income. Contribution analysis shows whether or not a firm is
Process Costing
Method for determining the total unit cost of the output of a continuous production run (such as in food processing, petroleum, and textile industries) in which a product passes through several processes (or cost centers).
Job Order Costing
An order-specific costing technique, used in situations where each job is different and is performed to the customer's specifications. Job costing involves keeping an account of direct and indirect costs.
Period Cost
1. Selling and general administrative expenses identified with the accounting period in which they are incurred, and charged against sales revenue in the same period. Also called period expense. 2. Depreciation, interest, rent, and other such costs assoc
Product Cost
The sum of all costs associated with the production of a specific quantity of a good or service.
Direct labor
Employees or workers who are directly involved in the production of goods or services. Direct labor costs are assignable to a specific product, cost center, or work order.
Materials
The matter from which something can be made. Material can include but is not limited to raw and processed material, components, parts, assemblies, sub-assemblies, fuels, lubricants, coolants, cleaning agents, and small tools and accessories that may be co
Overhead
1. Resource consumed or lost in completing a process, that does not contribute directly to the end-product. Also called burden cost. 2. Accounting: A cost or expense (such as for administration, insurance, rent, and utility charges) that (1) relates to a
Standard Price
Pre-established uniform price for a good or service, based on its historical price, replacement cost, or an analysis of its competitive position in the market.
Actual Price
An actual amount paid or incurred, as opposed to estimated cost or standard cost. In contracting, actual costs amount includes direct labor, direct material, and other direct charges.
Break Even Point
Point in time (or in number of units sold) when forecasted revenue exactly equals the estimated total costs; where loss ends and profit begins to accumulate. This is the point at which a business, product, or project becomes financially viable.
Relevant range of activity
In activity based costing, the types of activities for which the cost-behavior assumptions (fixed cost, mixed cost, variable cost) remain valid.
Fixed Cost
A periodic cost that remains more or less unchanged irrespective of the output level or sales revenue, such as depreciation, insurance, interest, rent, salaries, and wages.
Variable Cost
A periodic cost that varies in step with the output or the sales revenue of a company. Variable costs include raw material, energy usage, labor, distribution costs,
Allocation Cost
Process of Identifying the cost of services necessary for operation of a business
Underapplied overhead
A situation in which the overhead applied to a work in progress (WIP) product is less than the overhead that the WIP actually incurs. This results in the manufacturing overhead having a debit balance. Underapplied overhead is reported on the balance sheet
Overapplied overhead
1. Excess of overhead applied to work-in-process inventory over the amount of overhead actually incurred. This amount (called favorable variance) is added to the budgeted profit in the end-of-accounting-period financial statements. Also called overabsorb
Quality Variance
(AQ-SQ)xSP
EX.(22,000-24,000)x12.00
=24,000 Favorable
Price Variance
AQx(AP-SP)
EX. 22,000x(12.10-12.00)
=2,200 Unfavorable
Total Variance
Price Variance 2,200 U
Quantity Variance 24,000 F
Total Variance 21,800 F
Break Even Point In Units
Fixed Cost / Contribution Margin per Unt
Contribution Ratio
Contribution Margin/ Price
EX. 30/100 = .30
Break Even Analysis
Units to Break Even
(x)= FC/P-VC
EX. 24,000/100-70 = 24,000/30 = 800
30 is the Contribution Margin
Break Even Point in Dollars
Fixed Cost/ Contribution Margin Ratio
Purpose of Allocation
1. Facilitate decision making.
2. Measure income and assets for external parties.
3. Justify prices charged to customers for products and services.
4. Cost control / resource conservation
5. Create incentives for optimal resource utilization
