Search results
Results From The WOW.Com Content Network
Some examples of indirect costs and their drivers are: indirect costs for maintenance, with the possible driver of this cost being the number of machine hours; or the indirect cost of handling raw-material cost, which may be driven by the number of orders received; or inspection costs that are driven by the number of inspections or the hours of ...
The cost driver is a factor that creates or drives the cost of the activity. For example, the cost of the activity of bank tellers can be ascribed to each product by measuring how long each product's transactions (cost driver) take at the counter and then by measuring the number of each type of transaction.
The cost breakdown analysis is even more effective when repeated constantly, so that changes in the respective shares in total costs of the various cost drivers can be tracked down. Over a five-year period, the share of expenses for tires might have risen from 5% to 8%, accompanied by a decrease of expenses for personnel from 35% to 32%, which ...
The third step is to compute the predetermined overhead rate by dividing the estimated total manufacturing overhead costs by the estimated total amount of cost driver or activity base. Common activity bases used in the calculation include direct labor costs , direct labor hours , or machine hours.
Cost–volume–profit (CVP), in managerial economics, is a form of cost accounting. It is a simplified model, useful for elementary instruction and for short-run decisions. It is a simplified model, useful for elementary instruction and for short-run decisions.
Cost pools is an accounting term that refers to groups of accounts serving to express the cost of goods and service allocatable within a business or manufacturing organization. [1] The principle behind the pool is to correlate direct and indirect costs with a specified cost driver, so to find out the total sum of expenses related to the ...
An important part of standard cost accounting is a variance analysis, which breaks down the variation between actual cost and standard costs into various components (volume variation, material cost variation, labor cost variation, etc.) so managers can understand why costs were different from what was planned and take appropriate action to ...
The fundamental accounting equation, also called the balance sheet equation, is the foundation for the double-entry bookkeeping system and the cornerstone of accounting science. Like any equation, each side will always be equal. In the accounting equation, every transaction will have a debit and credit entry, and the total debits (left side ...