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industry practices | Dictionary

Industries that are regulated by the government often have prescribed reporting requirements that carry over to the generally accepted reporting formats for financial reporting. For example, utilities’ balance...

How is the material usage variance account reported on the financial statements? Definition of Materials Usage Variance The materials usage variance (in a standard costing system) results from using more or less than the...

Manufacturing Overhead - Part 1 | Explanation

Our Explanation of Manufacturing Overhead gives you examples of what is included in manufacturing overhead. You will learn that these are indirect product costs and therefore are allocated to the products in order to...

Activity Based Costing - Part 2 | Explanation

Our Explanation of Activity Based Costing illustrates how manufacturing overhead costs for a product will differ when costs are allocated using only the number of machine hours, as opposed to being allocated using the...

How can I determine the inventory methods used by other companies in my industry? Definition of Inventory Methods Inventory methods refers to the order or manner in which a company moves its actual costs out of the...

Will I be able to pass the CPA Exam after studying the accounting material on AccountingCoach.com? AccountingCoach.com contains introductory accounting material. While you need to master the principles and concepts...

Do variance accounts have an impact on financial statements? Or are they for performance evaluation only? Since the financial statements must reflect the cost principle, both the standard costs and the variances must be...

Manufacturing Costs | Quick Test

. direct material direct labor manufacturing overhead not a product cost (NA) 24. Factory supplies. Select... direct material direct labor manufacturing overhead not a product cost (NA) 25. Fuel for the fork lift trucks...

Current Ratio | Business Forms

Business Form Current Ratio This form shows you how to quickly compute your company's current ratio. The current ratio is related to working capital amounts used in our Form R1. Once computed, you can compare your...

Capital The adequacy of a company’s working capital depends on the industry in which it competes, its relationship with its customers and suppliers, and other factors such as the following: The types of current assets...

Where can I find financial ratios for my industry? One source for financial ratios by industry is the RMA Annual Statement Studies Financial Ratio Benchmarks. RMA is the acronym for Risk Management Association and...

quantity of direct material for its output, there will be no balance in the account Direct Materials Usage Variance. If the actual price per unit of direct materials is more than the standard cost per unit, the...

What is materiality? Definition of Materiality In accounting, materiality refers to the relative size of an amount. Relatively large amounts are material, while relatively small amounts are not material (or immaterial)....

Standard Costing - Part 1 | Explanation

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...

materiality | Dictionary

The accounting guideline that permits the violation of another accounting guideline if the amount is insignificant. For example, a profitable company with several million dollars of sales is likely to expense immediately...

statements to the earlier financial statements of the same company Compare a company’s financial statements to those of other companies (especially within the same industry) Understand how a company...

Standard Costing | Quiz

material associated with this variance had a standard cost of $200,000. At the end of the accounting year, the standard cost of the direct material is residing in the following: 19. Assuming that the unfavorable...

Accounting Principles | Quick Test

that best matches the descriptions listed as items 6 - 16: Each principle or term can be used several times. conservatism cost economic entity full disclosure going concern industry practices matching materiality...

Working Capital and Liquidity - Part 5 | Explanation

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...

indirect labor | Dictionary

Usually this refers to manufacturing employees who are not classified as direct labor. Material handlers, mechanics, setup workers, clean up workers are a few examples of indirect labor.

bill of materials | Dictionary

A listing of the materials included in a product. A bill of material could be thought of as a bakery’s recipe for producing one of its products.

standard cost per unit of input | Dictionary

A predetermined dollar amount that a pound of material or an hour of labor should cost during an accounting period.

exploding the bills of materials | Dictionary

Multiplying the individual items contained in each bill of material times the number of units expected to be produced during a specified time period. The result is the total quantity of each input that will be needed for...

direct materials | Dictionary

Raw materials that are a traceable component of a manufactured product. For example, the direct material of a baseball bat is the wood. Flour, sugar, and vegetable oil are direct materials of a company that manufactures...

setup cost | Dictionary

The cost associated with setting up a piece of production equipment. This would include the cost of the setup mechanic, the cost of scheduling, record keeping, moving the starting material, and testing the first few...

inventoriable cost | Dictionary

Cost that is considered to be part of the cost of merchandise. For a retailer, the inventoriable cost is the cost from the supplier plus all costs necessary to get the item into inventory and ready for sale, e.g....

materials price variance | Dictionary

See direct materials price variance.

indirect materials | Dictionary

For a manufacturer these would include factory supplies and other materials considered to be manufacturing overhead.

raw materials inventory | Dictionary

See direct materials inventory.

materials usage variance | Dictionary

See direct materials usage variance.

materials quantity variance | Dictionary

See direct materials usage variance.

inventory: materials | Dictionary

A part of a manufacturer’s inventory that includes direct and indirect materials. Also referred to as stores.

materials inventory | Dictionary

One component of a manufacturer’s inventory. Sometimes referred to as Stores or Raw Materials. (Other components of a manufacturer’s inventory are work-in-process and finished goods.)

direct materials inventory | Dictionary

That component of a product that has not yet been placed into the product or into work-in-process inventory. This account often contains the standard cost of the direct materials on hand. A manufacturer must disclose in...

What are direct materials? Definition of Direct Materials Direct materials are defined as: Traceable matter that is converted by a manufacturer into products Part of manufacturer’s production costs A variable cost of a...

How do I compute the product cost per unit? Definition of Product Cost per Unit In accounting, a product’s cost is defined as the direct material, direct labor, and manufacturing overhead. Other costs such as...

Standard Costing - Part 6 | Explanation

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...

inventory: work-in-process (WIP) | Dictionary

That part of a manufacturer’s inventory that is in the production process and has not yet been completed and transferred to the finished goods inventory. This account contains the cost of the direct material,...

Standard Costing: Direct Materials Price Variance | Business Forms

Business Form Standard Costing: Direct Materials Price Variance This form helps you to compare two amounts: 1) the actual cost that a company paid to suppliers for materials, compared to 2) the company's standard...

Standard Costing: Direct Materials Usage Variance | Business Forms

Business Form Standard Costing: Direct Materials Usage Variance This form gives you the layout to compute the usage variance associated with materials. The important first step guides you to compute the quantity of...