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By eliminating work-in-process accounts, backflush costing simplifies the accounting process. However, this simplification and other deviations from traditional costing systems mean that backflush costing may not always conform to generally accepted accounting principles (GAAP). Another drawback of this system is the lack of a sequential audit ...
For longer-term analysis that considers the entire life-cycle of a product, one therefore often prefers activity-based costing or throughput accounting. [1] When we analyze CVP is where we demonstrate the point at which in a firm there will be no profit nor loss means that firm works in breakeven situation 1.
Throughput Cost Accounting Analysis : Decline Contract Take Contract Coaches Produced 40 34 Streetcars Produced 0 15 Foundry Hours 80 113 Metal shop Hours 160 159 Coach Revenue $14,000 $11,900 Streetcar Revenue $0 $4,200 Coach Raw Material Cost $(2,400) $(2,040) Streetcar Raw Material Cost $0 $(1,800) Throughput Value $11,600 $12,260
In Cost-Volume-Profit Analysis, where it simplifies calculation of net income and, especially, break-even analysis.. Given the contribution margin, a manager can easily compute breakeven and target income sales, and make better decisions about whether to add or subtract a product line, about how to price a product or service, and about how to structure sales commissions or bonuses.
Labor costs are direct costs, that is, they can be identified among the total cost and assigned to a certain cost objective. [1] Labor costs are defined by categories (e.g. service labor or manufacturing labor), the attribution of a labor rate for each category, and a certain number of labor hours. [1]
Design-to-Cost (DTC), as part of cost management techniques, describes a systematic approach to controlling the costs of product development and manufacturing.The basic idea is that costs are designed "into the product", even from the earliest concept decisions on and are difficult to remove later.
Cost allocation is a process of providing relief to shared service organization's cost centers that provide a product or service. In turn, the associated expense is assigned to internal clients' cost centers that consume the products and services.
In accounting, as part of financial statements analysis, economic value added is an estimate of a firm's economic profit, or the value created in excess of the required return of the company's shareholders.