Chapter 2 Classification of Costs (by nature) Flashcards
Manufacturing cost
are classified as Direct materials, Direct Labor, and Factory Overhead.
Direct materials
All raw materials costs that become an integral part of the finished product and that can be conveniently and economically assigned to specific units manufactured
Factory overhead
the costs of running a business that can’t be directly attributed to a product or service. Factory overhead usually relates to factories or production of goods. So factory overhead is a cost that the business has to incur in order to produce its product, but the cost can’t be traced back to the production of the product.
Examples of Factory Overhead
Indirect materials, indirect labor, property taxes, insurance, supervisor’s salary, depreciation of factory building and factory equipment, and power
Indirect Materials
include materials and supplies used in the manufacturing operations that do not become part of the product
Indirect Labor
labor cost cannot be identified or traced to specific unitsmanufactured.
Prime Cost
Total Direct materials and Total direct labor cost
Conversion cost
Total Direct labor and Factory overhead cost incurred to convert the direct materials into the finished product.
Non-Manufacturing cost
includes cost related selling and other activities not related to the production of goods
Marketing Cost
all costs associated with marketing or selling a product or all costs incurred by the marketing division…
General Administrative Cost
All organizational and electrical costs associated with the general management of the organization
Common Cost
costs that are benefited two or more operations, products, or services.
generally referred to as joint-product costs
