Chapter 15 - Manufacturing and Non Manufacturing Costs
Prime costs
Are direct labor and direct materials
COGS calculation
Beginning Finished Goods Inventory + Cost of Goods Manufactured - Ending Finished Goods Inventory
Direct materials used
Beginning Raw Materials Inventory + Raw Material Purchases - Ending Raw Materials Inventory - Indirect Materials Used
Direct material
Cost of significant raw materials and components that are directly incorporated in the finished product. For example, direct material costs of a leather briefcase include cost of leather (raw material) as well as buckles and zippers (purchased components). Make up a significant part of the total cost of a finished product.
Period costs
Cost that are not part of the manufacturing process, also called selling and administrative costs. Selling costs are the costs involved in the marketing and delivering the product to customers. Administrative costs are the costs involved with managing the company.
Conversion costs
Costs that are incurred converting raw materials into a finished product, direct labor and factory overhead
Direct Costs
Costs that can be traced to specific units of production. Direct materials are actually incorporated into the product. Direct labor is comprised of the salary costs of workers who make the product.
Plant Mangers Salary
Factory Overhead
Indirect costs
Necessary costs of the manufacturing process that cannot be easily associated with specific units. These include all manufacturing costs other than direct material and direct labor. Indirect materials such as custodial and maintenance supplies, depreciation, and scrap are also overhead.
Financial Accounting
Reports created at fixed intervals, must follow GAAP. Info created for both external and internal viewers (Stockholders, investors)
Factory overhead
The cost of indirect labor, indirect materials, and other manufacturing costs other than direct material and direct labor that are necessary to support the production process but are not easily traceable to the finished product. Salaries paid to the production line supervisors, wages paid to mechanics who maintain the equipment, wages paid to custodians who maintain the factory, thread used to sew the briefcase together, electricity used to power the equipment and provide lighting to the factory, and depreciation on the factory building and equipment.
Total Manufacturing Cost
The sum of direct materials, direct labor, and manufacturing overhead incurred in the current period.
Direct labor
The wages and salaries paid for work that directly converts raw materials into a finished product. Wages paid to workers who cut the leather, finish the leather, and sew the briefcase.
Direct materials, direct labor, factory overhead (DLDMFO)
Three manufacturing costs
Cost of Goods Manufactured (COGM)
Total Manufacturing Cost (Direct Materials + Direct Labor + Overhead applied) + Beginning Work In Process Inventory - Ending Work in Process Inventory
Controller
chief management accountant of a company
depreciation on factory machinery
conversion cost
materials inventory (raw materials)
cost of materials that have been purchased but not put into the production process
Factory Assembly Line workers
direct labor
work in process inventory
goods that are partway through the manufacturing process but not yet complete
Factory Heat and Electric costs
indirect cost
finished goods inventory
manufactured items that are completed and ready for sale (but not sold yet)
Depreciation on corporate headquarter building
period cost
Shipping Expenses
period cost
Managerial Accounting
reports created at management discretion, for individual departments, products, territories, whole company or whatever managements desires. No specific requirements are necessary. Do not need to follow GAAP. Reports created for internal viewers only
Cost of Goods Sold (COGS)
the cost of the merchandise inventory that the business has sold to customers.