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32 Cards in this Set
- Front
- Back
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Manufacturing Costs
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- Direct Materials
- Direct Labor - Manufacturing Overhead |
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Manufacturing Overhead
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- Indirect Materials
- Indirect Labor - Maintenance and Repair on production equipment |
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Non-manufacturing Costs
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Selling and administrative costs
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Product Costs
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all costs involved in acquiring or making a product
Treated as expenses in the period in which the related products are sold |
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Product costs in the manufacturing industry
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Manufacturing Industry: Direct materials, direct labor and manufacturing overhead
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Period Costs
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Selling and administrative costs
they are expensed on the income statement in the period in which they are incurred |
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Two cost categories used in manufacturing costs
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Prime and conversion cost
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Prime Cost
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sum of direct materials cost and direct labor cost
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Conversion Cost
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sum of direct labor cost and manufacturing overhead cost
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Cost of Goods Manufactured
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consists of the manufacturing costs associated with goods that were finished during the period
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Schedule of Costs of Goods Manufactured
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Sum Direct materials, direct labor and manufacturing overhead
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Calculating COGM
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Total Manufacturing Cost
+ Beg. WIP - End. WIP ----------------- COGM |
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Difference between COGM and total manufacturing costs
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COGM doesn't include unfinished goods
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Where are direct labor, manufacturing overhead and direct materials added to?
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Work in Process
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Whats on the balance sheet?
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Raw materials, WIP and finished goods
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COGS equation
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Beg. Inv.
+ Purchases =GA4S -End Inv. |
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Gross Margin
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Sales - COGS
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NOI
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Gross Margin
- selling and administrative expenses |
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Income Statement
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Sales
-COGS =Gross Margin - Selling and Administrative Exp = NOI |
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COGS manufacturing Equation
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Beg. Finished Goods
+ COGM - End Finished Goods |
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COGM and direct materials
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-use raw materials instead of finished goods inv.
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Fixed Costs
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(constant in total)- remains constant in total regardless of changes in the level of activity
c. Average fixed cost per unit changes with activity (spread out) |
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Variable Costs
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(proportional to activity) – a cost that varies in total to direct proportion to changes in the level of activity.
Variable cost in constant per unit but varies in total with the activity level Ex. Direct materials |
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Direct Cost
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cost that can be easily traced back to a specified cost object
b. To be traced back to a cost object such as a particular product, the cost must be caused by the cost object |
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Indirect Cost
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Cannot be easily traced back to a specified cost object
Common Cost- cost that is incurred to support a number of cost objects but cannot be traced back individually |
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Differential cost and revenue
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Differs between alternatives
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Opportunity Cost
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potential benefit that is given up when one alternative is choosen
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Allocative efficiency
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Contract in size and put resources towards growing industries
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How is trade anti-inflationary
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the object of trade is to lower the price level of all goods
-spurs technological advances for greater efficiency |
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Determination of economys growth rate
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the degree by which the population willingness to abstain consumption so resources can be put towards investment
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what determines the limits for internal cost ratio?
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production costs
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what caused the US to lose comparative advantage in autos and steel in the 80s
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Unit labor cost
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