Chapter 2 Flashcards
Cost
a measure of a resource being sacrificed
Expense
resource being sacrificed IN THIS period
costs with future benifit
Asset - prepaid expenses inventory other current assets
Expenses (this period)
COGS R and D SG&A
Gross Profit
on income statement = revenue - COGS
Product costs
incurred to make the product. DM, DL, MOH IC. Everything after the manufacturing to include costs to sell and deliver are period costs
Period costs
no future benefit expensed in the current period. SG&A costs AKA operating expenses
Cost object
the thing we are applying costs to
Direct costs
product cost and can be easily traced to a product or service
Indirect costs/MOH
product costs but less obvious in final product (same as MOH). Fixed and variable costs are a part of MOH
Prime costs
Prime costs = Direct material + Direct Labor
Conversion costs
Conversion costs = DL + MOH cost to convert raw material into a product
Variable costs
constant cost per unit that change in total with volume
variable cost per unit X Volume of cost driver - change as you make more
capacity
upper limit on space
fixed costs
fixed in total and do not change as more units are produced within the available capacity. cost still vary per unit up to the capacity (rent of factory) - stay the same up to capacity
relevant range
range of units that can be produced from 0 to a company’s capacity
Inventory on the balance sheet
short term asset
Categories of inventory
Raw materials, WIP, Finished Goods
Materials requisition
shows type of materials and quantities requested
Sub categories of Raw materials
direct materials and indirecct materials
Direct materials used calculation
DMU = Beginning DM inventory + DM purchases - Ending DM inventory
What costs are added to WIP
Direct materials, MOH, DL. All costs are added to WIP
what costs are added to finished goods
none that’s why they are finished
formula for COGM
COGM = Beginning WIP + Total manufacturing costs - ending WIP the journal entry crediting WIP and debiting FG. COGM IS THE CREDIT SIDE OF WIP
