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6 Cards in this Set

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  • Back
Define
Manufacturing Cost
includes:
1. Direct Material (DM) - raw material that become an integral part of the finished product and that can be physically and conveniently traced to it (i.e. tiny electric motor Panasonic used to make CD player spin CDs)

2. Direct Labor (DL) - aka touch labor - those labor costs that can be easily (physically & conveniently) traced to individual units of product (i.e. labor cot of assembly-line workers)

3. Manufacturing Overhead (MO) - include all cost of manufacturing except direct materials and direct labor (i.e. maintenance and repair on production equipment, etc)
Define conversion cost
aka value-added cost - MO combined w/DL; stems from the fact that both are incurred to convert materials into finsihed products
Define prime cost
DL w/DM
Define non-manufacturing costs
aka selling, general, and administrative (SG&A) - includes:

1. marketing or selling cost - aka order-getting and order-filling costs - include all cost necessary to secure customer orders and get the finished product into the hands of the customer (i.e. advertising, shipping, sales travel, sales commissions, sales salaries, and costs of finished goods warehouses)

2. Administrative cost - all executive, organizational, and clerical cots associated w/ the general management of an organization rather than w/mfg, marketing, or selling (i.e. executive compenation, general accounting, secretarial, public relation, and overall general administration of the organization as a whole)
Define product cost.
def. all the costs that are involved in acquiring or making a product; originally assigned to inventory account & treated as expenses only when sold (therefore called inventoriable costs)
Define period cost.
def. all the costs that are not included in product cost; expensed on the income statement in the period in which they are incurred (i.e. all selling and administrative costs, sales commission, office rent)