Organization Sustaining Costs

Organization-sustaining costs and the costs operating at idle capacity should not be assigned to products. They are not product costs. These costs represent resources that are not consumed by production of the products. Organization-sustaining costs can be considered sunk costs by the company

Calculate Partial Year Depreciation

When a plant asset is acquired during the middle of a year or month, depreciation is calculated for the fraction of the year the asset is owned. For example, if it was purchased in June, it would be equal to .5 years

Assumption of Absorption Costing

There is one main assumption that an accountant must remember when using the absorption costing approach. This method assumes that consumers and purchasers do not react to prices at all when making their decisions to purchase.

It assumes that consumers will purchase the foretasted unit sales regardless of the price that is charged to them. It is important to remember this when using the absorption costing approach.

Three Elements of Product Cost

In a manufacturing company, the three major elements of product costs are direct materials, direct labor, and manufacturing overhead costs.

Calculate Depreciation per Unit

To calculate depreciation per unit use the following equation:

Depreciation Per Unit= (Cost- Salvage Value)/ Total Units of Production

What is Financial Leverage?

The use of debt in a firm's capital structure is called Financial Leverage. It measures the amount of debt is a firm's capital structure.

The more debt a first must use, the more financial leverage it has. Using financial leverage is like a double edged sword because it can magnify the firm's potential gains and loses. It can Financial Leverage can increase returns for shareholders but also eliminate profits in rough times.

Financial Accounting Foundation FAF Established

Financial Accounting Foundation FAF
Established 1973

• Responsible of appointing members to Financial Accounting Standards Board (FASB)
• Responsible of appointing members to Financial Accounting Standards Adviory Committe (FASAC)
• Provides financial support to FASB

Calculate Depletion per unit

To Calculate Depletion per unit of a resource, use the following accounting equation:

Depletion Per Unit = (Cost - Salvage Value)/ Total Units of Capacity

Accounting Principles Board APB

Accounting Principles Board APB 1959- 1973

• Appointed by the American Institute of Certified Public Accountants (AICPA)
• Primarily Members from public accounting
• Issued 31 AFB Opinions
• Reputation of being slow to reaction with problems

What is allocation base?

Manufacturing overhead is applied to jobs that are in process. An allocation base, such as direct labor hours, direct labor dollars, or machine hours, assigns manufacturing overhead to individual jobs.