Flow of Costs

expensing method where both variable manufacturing expenses and fixed manufacturing expenses are considered as inventory expenses. It is used to show inventory valuation that is reported on the balance sheet.

time period covered by financial statements, such as monthly, quarterly, semiannual, or annual statements

standard unit that provides the system for the way overhead costs of a product or service are divided

expenses necessary to transform raw material to a finished product, generally equal to direct labor cost plus manufacturing overhead

amount spent to produce a product from start through completion and entry into finished goods inventory

total money spent to purchase or produce the products that were sold during an accounting period

method a company uses to track expenses and thereby calculate the cost of its products or services

raw goods that can be traced directly to, or easily identified with, a specific product

goods that have completed 100% of the production process but have not yet been sold

expense of operating a company for a specific period of time that remains unchanged despite changes in the company's activity level

rules and standards adopted by the Securities and Exchange Commission that companies must follow when reporting financial information

materials used in a production process that cannot easily be traced to a product. The company applies them to the product by including them as part of overhead costs.

any system used to track the increase or decrease of inventory

system that companies use when they can trace costs to a specific product or service

indirect, factory-related production costs that come from making an item

result of the overhead costs applied to work in process (WIP) inventory being higher than the actual costs

operating costs or expenses, such as rent, electricity, and taxes

overhead costs that are assigned to a product based on a predetermined rate or other formula

estimated ratio established before an accounting period begins and used to allocate costs involved in producing goods or services. The accountant calculates it by dividing the estimated manufacturing overhead costs for the accounting period by the allocation base.

system used when large quantities of similar products are manufactured and expenses are applied to a series of actions instead of an individual product

raw goods that can be traced directly to, or easily identified with, a product

result of the overhead costs applied to work in process (WIP) inventory being less than the actual costs

expense that increases or decreases with the level of production

method in which all fluctuating expenses from manufacturing are considered as part of inventory expenses

means of keeping track of products that have started through production but are not yet complete