Production costs in the financial statements

Question 1

cost of a cost object

Answer 1

total costs incurred by an entity in the process of manufacturing a good or rendering a service, until the cost object is available for sale to te final user or the consumer

Question 2

production cost

Answer 2

sum of all costs (direct materials, labour and other costs) incurred to manufacture a product or a service, as opposed to selling or financing costs

Question 3

Manufacturing cost

Answer 3

costs that includes all the expenses attributed through allocation, distribution or assignment, required to design, produce and supply a good or a service, or a homogenous group of goods or services

Question 4

commercial cost

Answer 4

purchase price of a merchandise, plus all the costs incurred in the process of the acquisition

Question 5

direct costs

Answer 5

costs that are directly attached to a cost object

DM and DL

Question 6

indirect cost

Answer 6

ressources shared by many cost objects

MOH

Question 7

conversion cost

Answer 7

cost of all the ressources that have directly or indirectly been used to transform the direct materials into finished goods è
(DL and MOH)

Question 8

full cost

Answer 8

all the costs associated with a cost object (fixed and variable)
(direct materials and conversion costs)

Question 9

equation incurred costs (sub-total)

Answer 9

work in progress (WIP) inventory (beginning) + direct materials used + direct labour + manufacturing overhead (MOH)

Question 10

equation cost of goods manufactured (of the units completed during the period)

Answer 10

incurred costs - work in progress inventory (ending)

Question 11

total costs of goods manufactured

Answer 11

• represents the cost of all the units manufactured and completed during a period
• is used to valuate the finished goods inventory and to determine the cost of goods sold during the period

Question 12

unit cost of goods manufactured (average cost)

Answer 12

is obtained by dividing the cost of goods manufactured for a period by the number of units manufactured and completed during the same period

Question 13

the total cost of goods manufactured is dependent on the number of…

Answer 13

units manufactured during the period

Question 14

the costDM of goods sold is dependent on the cost of….

Answer 14

goods manufactured during the period

Question 15

the operating costs are the…

Answer 15

selling and administrative expenses

Question 16

equation opening finished goods inventory

Answer 16

nb of units of the finished goods in stock (opening) x units manufacturing costs of the prior period

Question 17

equation closing finished goods inventory

Answer 17

nb of units of the finished goods in stock (closing) x unit manufacturing cost of the current period

Question 18

wip inventory (begining) represents…

Answer 18

the unfinished units from the previous period that were completed in the current period

Question 19

DM used represents…

Answer 19

all the materials directly included in the production process for which the quality (or the cost) for each unit can be determined

Question 20

cost of DM used includes…

Answer 20

only the DM used during the period

the unused DM is an inventory item accounted for as an asset on the balance sheet

Question 21

DL represents…

Answer 21

the wages paid to employees who directly work on the direct materials in order to transform them into finished goods

Question 22

MOH represents…

Answer 22

the indirect costs incurred in the production process, but that cannot be classified as direct materials or direct labour

Question 23

WIP inventory (end) represents…

Answer 23

the costs incurred in the current period to begin the transformation of units that will be completed in the following period