Break-even analysis can also provide information about projected profits for those considering buying a business. The equation can help them calculate the number of units and the dollar amount needed to make a profit, and then decide whether these numbers seem credible and realistic. Direct Materials Cost is the cost of materials purchased directly in…
Costs are assigned to inventory using either a standard costing, codification of staff accounting bulletins weighted-average cost, or cost layering methodology. See the standard costing, weighted-average method, FIFO, and LIFO topics for more information. To reduce the costs of doing business, you must understand first where your production costs lie. It is also important for…
Companies that use variable costing may be able to allocate high monthly direct, fixed costs to operating expenses. Most companies may have to transition to absorption costing at some point, however, and it can be important to factor this into short-term and long-term decision-making. The GAAP standard-setters believe that absorption costing better upholds the matching…
Let’s say you run a small business that features a workforce of over 40 employees – all on hourly wages. If you’re not using arrears, you would be paying a total of 800 hours in advance. If you encounter an issue and have to close for two days, you’ll have to either adjust all of…
