Management Accounting
Advantages and Disadvantages of Standard Costing and Variance Analysis Learning Objective of the article: What are the advantages / benefits and disadvantages / problems / limitations of standard costing system and variance analysis? Advantages / Benefits of Standard Costing System: Standard costing System has
Cost Terms, Concepts, and Classifications: After Studying this chapter you should be able to: Identify and give examples of each of the three basic manufacturing cost categories. Distinguish between product costs and period costs and give examples of each. Prepare an income statement including
Advantages and Disadvantages of Joint Venture Learning Objectives: What are the advantages and disadvantages of joint ventures? Smart entrepreneurs and business owners know that Joint Ventures are the fastest and most effective way to radically increase sales and profits with virtually no money and
Cost Structure Definition: Cost structure is the relative proportion of fixed, variable, and mixed costs found within an organization.
Advantages and Disadvantages of Absorption Costing System Learning Objectives: What are the advantages and disadvantages of using absorption or full costing method? Advantages of Absorption Costing: It recognizes the importance of fixed costs in production; This method is accepted by Inland Revenue as stock
Independent Variable Definition: An independent variable is a variable that acts as a causal factor; activity is the independent variable, as represented by the letter X in the following equation: Y = a + bX
Administrative Cost Definition Administrative costs are all executive, organizational, and clerical costs associated with the general management of an organization rather than with manufacturing, marketing, or selling.
Adjustments for Departures from the Costing Method Used–Inventory Valuation The problem of year end inventory valuation is primarily a question of the materials cost consumed in products manufactured and sold to customers and the cost assignable to goods in inventory ready to move into
Cost Volume Profit (CVP) Consideration in Choosing a Cost Structure: Definition and Explanation of Cost Structure: Cost structure refers to the relative proportion of fixed and variable costs in an organization. An organization often has some latitude in trading off between these two types
Cost Reconciliation Definition: Cost reconciliation is the part of a production report that shows what costs a department has to account for during a period and how those costs are accounted for.
Adjusting Materials Ledger Cards and Accounts to Conform to Inventory Accounts – Inventory Valuation When the inventory count differs from the balance on the materials ledger card, the ledger card is adjusted to conform to the actual count. if the ledger card balance shows
Adjusted R2 Definition Adjusted r2 is a measure of goodness of fit in least-squares regression analysis. It is the percentage of the variation in the dependent variable that is explained by variation in the independent variable.
Incremental Cost Definition: Incremental cost is defined as an increase in cost between two alternatives. Also see Differential cost.
Addition of Materials – Increase in Unit Cost Learning Objective: What is the effect on the calculation in the preparation of a cost of production report when materials are added in a department subsequent to the first and as a result unit cost is
Cost or Market Whichever is Lower–Inventory Valuation: American costing tradition follows the practice of pricing year-end inventories at cost or market, whichever is lower (lower of cost or market). This departure from any experienced cost basis is generally defined on the grounds of conservatism.
Incremental Analysis Definition: Incremental analysis is an analytical approach that focuses only on those items of revenue, cost, and volume that will change as a result of a decision. Y = a + bX
Beginning Work in Process Inventories Average Costing Method: When beginning work in process inventory costs are merged with costs of the new period, the problem is essentially one of securing representative average costs. Ordinarily, the averaging process is quite simple. Example: The Clonex Corporation
Income Tax and Capital Budgeting Decisions: Learning Objectives: Include income taxes in a capital budgeting analysis. In our discussion of capital budgeting decisions in this chapter, we ignored income taxes for two reasons. First, many organizations do not pay income taxes. Not-for-profit organizations, such