Resources ❯ Accounting Terms

Burden Rate

[BUR-dən rāt]

What is the definition of Burden Rate?

The burden rate is a calculation used to determine the overhead costs associated with a specific level of activity, such as labor or machine hours. This rate is typically expressed as a standard rate multiplied by the activity measure to allocate overhead costs accurately to specific tasks or projects.

Using Burden Rate in an Example

In a manufacturing company, the burden rate is used to allocate factory overhead costs to individual units of production based on the labor hours required to manufacture each unit. For example, if the overhead costs are $50,000 and the total labor hours are 5,000 hours, the burden rate would be $10 per labor hour.

Using Burden Rate in a sentence

Our accountant calculated the burden rate to better understand the true cost of production and ensure pricing strategies cover all incurred expenses.

Related Terms

Backup Withholding

Backup withholding is the mandatory withholding of income tax from payments such as interest, dividends, and other types of reportable income by payors like banks and businesses. This withholding occurs when the recipient fails to provide a Taxpayer Identification Number (TIN) or to certify that they are not subject to backup withholding, as directed by the IRS.

Bad Debt

A portion or the entirety of an account, loan, or note receivable that is deemed uncollectible.

Balance

In accounting, balance refers to the equality between the sum of the debit and credit sides of an account. It is also used to describe the preparation and presentation of a balance sheet, which details an entity's assets, liabilities, and the equity of its owners at a specific date.

Bank Reconciliation

A process by which an accountant verifies the accuracy of a company's cash account in its general ledger against its bank statement, identifying any discrepancies to adjust the accounting records accordingly.

Bank Statement

A periodic statement, typically issued monthly, by a bank to the account holder detailing all transactions that have occurred within the account. It includes the opening balance, deposits, withdrawals, fees, and the closing balance for the period.

Bankruptcy

A legal process governed by federal statute in which an insolvent debtor's assets are liquidated and managed by a court-appointed trustee to satisfy debts to the greatest extent possible.

Base Market Value

The average market price of a group of securities at a given time.

Beginning Inventory

The quantity of merchandise or goods that a company has available for sale at the start of an accounting period.

Bequest

Property or assets left to an heir or a beneficiary under the terms of a will.

Beta Coefficient

A measure of a stock's relative volatility, indicating how its price movements are related to the overall stock market. The beta coefficient is calculated as the covariance of the stock's returns with the market's returns, divided by the variance of the market's returns.

Bid and Asked

In trading, 'bid' refers to the highest price a buyer is willing to pay for a security, while 'asked' is the lowest price a seller is willing to accept. The difference between these two prices is known as the 'spread'.

Blue Sky Laws

State regulations designed to protect investors from securities fraud by governing the issuance and registration of securities, coordinated with federal securities laws.

Board of Directors

A group of individuals elected by the shareholders of a corporation to oversee the management and affairs of the entity, ensuring that organizational activities align with established policies and objectives.

Bond

A bond is a type of long-term promissory note, issued as a security under federal or state laws, where the issuer borrows funds from the bondholder and agrees to pay back the principal amount at a specified maturity date, along with periodic interest payments.

Bond Discount

The amount by which the selling price of a bond is less than its par value.

Bond Indenture

A legal contract associated with a bond issue that specifies the terms of the bond, including the rights, privileges, and obligations of the bondholders and the issuer.

Bondholder

An individual or entity that owns a bond issued by a government or corporation, possessing rights to receive interest payments and the return of principal as stipulated in the bond's terms.

Book Value

The net amount that an asset or liability is recorded on the balance sheet, also known as the carrying value. It is calculated by deducting accumulated depreciation, amortization, or impairments from the original cost of the asset.

Bookkeeping

The process of systematically recording, organizing, and maintaining financial transactions and information for a business or individual.

Boot

In financial and tax contexts, 'boot' refers to any additional cash or property added to a transaction to balance the value of exchanged properties, typically in transactions that are otherwise nontaxable.

Bottom Line

The final line in a financial statement that shows the net income or loss, reflecting the financial performance of a company over a specific period.

Break-Even Point

The financial point at which total revenues exactly equal total costs, resulting in no net loss or gain.

Break-Even Units

The number of units of a product that a company needs to sell to cover all its costs associated with producing those units, both direct and indirect. Selling beyond this point begins to generate profit.

Budget

A budget is a financial plan that serves as an estimate of future costs, revenues, or both, often detailed into specific categories like advertising, sales, or capital investments.

Business Combinations

Business combinations refer to the process where two or more entities are consolidated into one entity through various methods such as purchase or pooling of interests. In the purchase method, one entity acquires another and establishes a new accounting basis for the acquired entity's assets and liabilities. In pooling of interests, entities merge by exchanging common stock, and the carrying values of assets and liabilities remain unchanged.

Business Segment

A distinct part of a company that is authorized to operate under substantial control by its own management, often with separate financial and operational guidelines.

Buyout

The purchase of a controlling interest in a company's stock, which enables the acquirer to take over its assets and operations. This can be effected through a leveraged buyout, where the purchase is made with borrowed money.

Bylaws

Bylaws are a collection of formal, written rules that govern the management and operational procedures of a corporation or organization, including the roles of officers and the process of making decisions.

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