When the goods are used by your business, they become an expense of the business. A tire used for a lawn mower b. Other costs you incur for goods are included, such as shipping and storage costs. The amount of costs allocated to products d. Which one of the following represents a period cost? The budgeted machine hours for the year totaled 20,000.
Information may be abridged and therefore incomplete. Lumber used to build tables 24. Revenue Recognition Before you can tie expenses to revenue, you must know when revenue should be recognized in the accounting records. A typical question on this topic lists variable manufacturing costs, or fixed selling and administrative costs. Cannot be determined from the information provided.
If the product line is discontinued, Definition Answer: the contribution margin of the product line will indicate the net income increase or decrease. The number of products produced b. Term Question : Budget reports should be prepared Definition Answer: as frequently as needed. This machine has a useful life of 10 years. The May revenue should be matched with the expenses you incurred for the lamps sold in May. Cost of goods sold b. The cost recorded determines the profit on the sale, and the eventual tax on the profit.
The formula for the predetermined overhead rate is estimated annual overhead costs divided by an expected annual operating activity. The matching concept is the guideline accountants use to be sure expenses are related to revenues and show up in the same period. When raw materials are purchased, the Work in Process Inventory account is debited. Rivets for the wings of a new commercial jet aircraft d. When raw materials are received, there is no effort at this point to associate the cost of materials with specific jobs. All manufacturing costs that cannot be classified as direct materials or direct labor are classified as manufacturing overhead.
Term Question : The reporting standard for external financial reports is Definition Answer: generally accepted accounting principles. Which of the following is not classified as direct labor? Period costs are thus expensed in the period in which they are incurred. Try to find total fixed costs in the question and use that number. Period costs include selling and administrative expenses. Cannot be determined from the information provided. It would make it look like your business performed very poorly that year.
Familiarize yourself with the most important formulas, terms, and principles you need to know to apply cost accounting. Freight costs are inventoriable costs, as well as costs incurred to make changes or additions to the items in inventory. Bolts used in manufacturing the compressor of an engine c. About the Author Laura Chapman holds a Bachelor of Science in accounting and has worked in accounting, bookkeeping and taxation positions since 2012. The number of defects found on each product 22. Unlike many other expenses, inventory costs do not become expenses until a sale takes place. Unfavorable variances are the reverse: More actual costs and less actual revenue is unfavorable.
Bakers in a bakery 18. Product costs consist of a. Examples — Angle Machining, Inc. Insurance on factory building d. As an example, when a retailer adds their brand name or logo to an inventory item, it is an inventoriable cost. The glue used in the production process is classified as a n a.
Direct labor and manufacturing overhead d. Term Question : The two major steps in the flow of costs are Definition Answer: accumulating and assigning. When someone performs a service for your business, whether as an employee or as a contract laborer, you have incurred an expense. Period costs are not inventoriable costs. What amount was transferred to Finished Goods? The average number of days in inventory during the year was Definition Answer: 48. The matching principle means that sales and cost of sales are incurred in the same time period.
If you sell lamps in May, you create revenue for that month. Term Question : Gant Co. Term Question: Which one of the following costs would not be inventoriable? According to the matching principle, the machine cost should be matched with the revenues it creates. The emphasis on financial and non-financial performance measurements c. Regardless of when the customer actually pays you for the roofing job, you performed the work and are owed the money. Term Question : Damask Industries makes and sells widgets.