Costs Flashcards
Cost Object
Anything for which we want to calculate a cost, such as a product or a product line, a service, or a process for which cost information is measured & accumulated.
Direct Materials (DM)
Raw Materials
Direct Labour (DL)
Work completed by employees that can be physically, directly & easily associated with converting raw materials into finished goods.
e.g:
-Legal staff in a law firm
-Assembly line worker at manufacturer
Manufacturing Overhead (MOH)
Costs incurred that are indirectly associated with the manufacture of finished goods.
e.g:
-Indirect Materials (glue, lubricant etc…)[Can’t see it in final product]
-Dep’n, insurance, Taxes and maintenance
-Indirect labour (security, janitorial staff etc..)
-Indirect labour
-Factory repairs
-Factory utilities
-Factory depreciation
-Factory Insurance
Prime Costs
(Primary costs)
Sum of all direct materials & direct labour costs.
Prime Costs are all DIRECT MANUFACTURING costs.
Prime Costs= DL + DM
Conversion Costs
cost of converting raw materials into a final product, sum of direct labour and manufacturing overhead and direct labour make up the cost object.
Conversion Costs = MOH+DL
* If we add Prime & Conversion Costs, we double count DL costs.*
Product Costs
= DL + DM + MOH
Product costs can be recorded as inventory when incurred.
Period Costs
- All non-manufacturing costs
-Period costs include all selling & marketing expenses, as well as all general & administrative expenses.
The three inventory accounts
-Raw materials inventory
-Work in process inventory
-Finished goods inventory
RM-> WIP ->(COGM)->FG ->COGS
beg WIP + TMC - end. WIP = COGM
COG available for sale
beg. FG + COGM = COG available for sale
&
COGS = Beg. FG + COG av. for sale - End. FG
TMC
Raw materials(DM) + DL + MOH
COGM schedule
Beg. WIP + TMC - end. WIP = COGM
which then goes into the FG inventory
