Category Archives for Managerial Accounting Topics

Income Statements for Merchandising Companies and Cost of Goods Sold

Merchandising companies sell products but do not make them. Therefore, these companies will have cost of goods sold but the calculation is much easier than for a manufacturing company. Expenses for a merchandising

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Cost of Goods Sold and The Income Statement for Manufacturing Companies

Manufacturing companies are companies that make a product. Because these companies have inventory in various stages of production, there are three inventory accounts that we must deal with in order to

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Job Costing and Overhead Allocation

We have previously discussed cost objects and assigning costs to cost objects. One object that is used frequently by job costing. Job costing is a cost allocation method used by companies that make

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Applied Overhead Versus Actual Overhead

In the previous post, we discussed using the predetermined overhead rate to apply overhead to jobs. This applied overhead is an approximation. What about actual spending for overhead costs? Let’s

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Allocating overhead variances to work-in-progress, finished goods, and cost of goods sold

When overhead is overapplied or underapplied, there are two different ways to allocated the variance. In the previous post, we allocated all of the variance to cost of goods sold. However, that is not

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Calculating and Applying Department Overhead Rates

Sometimes a single predetermined overhead rate causes costs to be misallocated. Imagine you are renting an apartment with three friends. The rent is $600 per month, cable is $150 per month, and groceries

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