What are “initial direct costs” and how are they accounted for by lessees and lessors?

Q: how does the contribution margin pricing method differ from ratio pricing method?

A: The question is based on the concept of pricing policy and methods. The product's price can be…

Q: The lessor’s initial direct costs often are substantial. What are initial direct costs?

A: The costs which are associated directly with originating a lease and are essential to acquire the…

Q: What is the difference between direct and indirect operating expenses?

A: Direct operating expenses: The expenses that are directly related to the operations of the…

Q: Can you classify the expenses listed as Variable or Fixed Costs

A: Variable costs are those costs that change with the change in production. Whereas, fixed cost are…

Q: Why aren’t common fixed costs allocated to segments under the contribution approach?

A: Contribution approach income statement segregates variable and fixed costs. In this approach…

Q: Why is it that product costs are distinguished from period costs?

A: Product cost is the cost that is incurred to manufacture the product. The product cost will include…

Q: Does the concept of the relevant range apply to fixed costs? Explain.

A: Fixed Cost: It is a cost which is constant in the short run, it is not related to any change in the…

Q: The amount of increase or decrease in cost that is expected from a particular course of action as…

A: Discretionary cost: A discretionary expense is a cost that a business or household can survive…

Q: Why do managers consider direct costs to be more accurate than indirect costs?

A: Cost: Cost refers to the expense incurred by the business to earn revenue from sales. In other…

Q: What is the amount of the difference between the variable costing and absorption costing net…

A: Sales             3,311,000  Variable costs       Direct Materials           1,161,000…

Q: What effect do minor deviations from the EOQ have on totalinventory cost?

A: Minor variations from the EOQ will not in general highly affect the total inventory cost except if…

Q: How do managers decide whether a cost is avariable or a fixed cost?

A: Cost refers to the amount of money incurred for acquiring a product or manufacturing a product. Cost…

Q: Why aren’t common costs allocated to segments under the contribution approach?

A: Segment margin is a useful measure to assess the performance of an operating unit.   A common fixed…

Q: What is the difference between absorption-costing income and variable-costing income?

A: The income statement is prepared to record the revenues and expenses of the current period.

Q: What is interpretation of the usefulness of the contribution margin concept?

A: Contribution margin The additional profit gained for each unit sold is calculated by subtracting the…

Q: Giving examples, distinguish between Prime costs and Marginal costs

A: Prime costs are the firm total expenses directly related to the materials and labour used in…

Q: How are costs assigned differently using the average cost method?

A: Inventory valuation is the valuation of inventory at the time of its purchase and sale using…

Q: How does an engineered cost differ from a discretionary cost?

A:

Q: (a) What are the percentage depletion and the cost depletion allowances?

A: Depletion: It refers to the process of proportionately distributing the cost of the extracting…

Q: Direct costs can be referred to as fixed costs. True or False?

A: Cost are divided into two parts which are, (1) Direct cost (2) Indirect cost Direct costs are the…

Q: a) Why are neutral expenes eliminated and imputed cost added to derivee cost from expenses

A: Deriving the cost from expenses is necessary to ascertain the exact cost incurred and to…

Q: How is contribution margin calculated?

A: Contribution margin means sales revenue over and above the variable costs of production and selling…

Q: Why might it be misleading to show the fixed costs on a per unit basis?

A: Fixed Costs are those costs that do not change in aggregate in relation to the level of production…

Q: What is the difference between total costs and marginal costs?

A: Total cost is the total economic cost of production. Variable cost changes according to the quantity…

Q: How should mixed costs be classified in cost, volume, and profit analysis?

A: Based on the cost behaviour costs are classified as fixed costs , variable costs and mixed costs.…

Q: What does the Contribution margin equation express?

A: Break Even Point:                 Break Even Point is defined as the level where there is no profit…

Q: What are “initial direct costs” and how are they accountedfor?

A:

Q: What is fixed cost

A: The answer is as fallows

Q: Why is it essential to determine unit costs or profits?

A: Determining unit cost means to find out total cost incurred on a particular unit It is determined by…

Q: What is the difference between joint costs and common costs?

A: Cost Accounting: It is the process of collecting, recording, analyzing the cost, summarizing cost,…

Q: Whats the difference between prime and conversion costs?

A: Prime cost: It is the cost which is incurred for manufacturing a product. It includes direct…

Q: In what sense is the WACC an average cost? A marginal cost?

A: Weighted average cost of capital is the firm's cost of capital which is based on proportion of each…

Q: How does a contribution margin income statement differ from a traditional income statement?

A: Income statement: The financial statement which reports revenues and expenses from business…

Q: What are sunk costs? Give an example.

A:

Q: What are direct out-of-pocket costs

A: There are various types of costs, some of which may be reimbursed and others that may not be. Direct…

Q: How does the residual income approach overcome this problem?

A: Definition: ROI: It is a measure of the amount of return on a particular investment with respect to…

Q: t the contribution margin and net operating income?

A: Contribution Margin: Contribution margin refers to the contribution earned by the company from the…

Q: what is a sunk cost

A: Cost: The amount paid to purchase the asset, install it, and put it into operations, is referred to…

Q: hould the costs be historical (embedded)costs or new (marginal) costs?

A: Historical cost is the original cost at which an asset was purchased by corporation and used in the…

Manufacturing Costs

Manufacturing cost is the total cost of procuring or producing a product. In other words, the manufacturing cost is the cost that an individual or business owner undertakes for the manufacturing of goods.