Search results
Results from the WOW.Com Content Network
The preferred term is now only "investment." Note that TOC recommends inventory be valued strictly on totally variable cost (TVC) associated with creating the inventory, not with additional cost allocations from overhead. Operating expense (OE) is the money the system spends in generating "goal units." For physical products, OE is all expenses ...
Absorption costing is permissible under GAAP. Traditional TAC was developed in the age of manufacturing and mostly used to arrive at the full manufacturing cost of producing goods; an alternative method of arriving at full cost known as activity-based costing (ABC) is often thought to be more appropriate for services. Absorption costing is a ...
The difference between the cost of an inventory calculated under the FIFO and LIFO methods is called the LIFO reserve (in the example above, it is $750, i.e. $5250 - $4500). This reserve, a form of contra account , is essentially the amount by which an entity's taxable income has been deferred by using the LIFO method.
Operating income is a value that is used to demonstrate a company's profitability after it has deducted other costs such as cost of goods sold (COGS), employee wages and other operating expenses.
Under full (absorption) costing fixed costs will be included in both the cost of goods sold and in the operating expenses. The implicit assumption required to make the equivalence between the accounting and economics terminology is that the accounting period is equal to the period in which fixed costs do not vary in relation to production.
On an income statement, "operating expenses" is the sum of a business's operating expenses for a period of time, such as a month or year. In throughput accounting, the cost accounting aspect of the theory of constraints (TOC), operating expense is the money spent turning inventory into throughput. [4]
An example of an income statement using variable and absorption costing. Variable costing is a managerial accounting cost concept. Under this method, manufacturing overhead is incurred in the period that a product is produced. This addresses the issue of absorption costing that allows income to rise as production rises. Under an absorption cost ...
Standard Costing is a technique of Cost Accounting to compare the actual costs with standard costs (that are pre-defined) with the help of Variance Analysis. It is used to understand the variations of product costs in manufacturing. [6] Standard costing allocates fixed costs incurred in an accounting period to the goods produced during that period.