Chapter 3

finished goods

consists of completed units of product that have not yet been sold to customer the amount transferred from work in process to finished goods is referred to as cost of goods manufactered

Raw Materials

include any materials that go into the final product raw material purchases are recorded in the raw materials inventory account when raw materials are used in production such as direct materials, their costs are transferred to work in process inventory

cost of goods manufactered

includes manufacturing costs associated with units of products that were finished during the period. as jobs are sold their copsts are tranferred from finished goods to cost of goods sold.

period costs

selling and administrative expenses do not flow into the ionvenotires on the balance sheet, they are recorded as an expense on the income statement the period incurred

Work in Process

consists of units of product that are only partially complete and will require further work before they are ready for sale to the customer to transform direct materials into completed jobs, direct labor is added to work in process and manufactuering overhead is applied to work in process by multiplying the predetermined overhead rate by the actual quantity of the allocation base consumed by each job. when jobs are completed, their costs are trasnferred from work in process to finished goods inventory