ch.4.2

total manufacturing cost

The direct materials used in production, direct labor incurred, and manufacturing overhead incurred during a particular accounting period.

Raw Materials Inventory

The general ledger account used to accumulate raw materials purchased and used in the production process.

Raw Materials Inventory increases

when materials are purchased and decreases when materials are used. direct or indirect materials. The use of direct materials increases Work in Process Inventory, whereas the use of indirect materials increases Manufacturing Overhead

Supplies Inventory

An account used to accumulate the cost of indirect materials.

Finished Goods Inventory

An inventory account used by manufacturing firms that accumulates all production costs that have been incurred to complete products. It is equivalent to the single inventory account used by merchandising firms that buy inventory.

Work in Process Inventory

Inventory account that accumulates the costs of all products that have been started but are not yet complete.

Work in process inventory increases

as direct materials are used, and direct labor and overhead costs are incurred, When products are finished, their costs must be removed from Work in Process Inventory and added to Finished Goods Inventory.

calculate the ending balance

beginning balance+cost added during the period-cost removed during the period=

Finished Goods Inventory increases

by the cost of goods manufactured (good finished units) and decreases by the cost of goods sold. When products are sold, they are removed from inventory and recognized as an expense on the income statement.