section 11 Flashcards
What are the 2 kinds of operating costs?
—product
—period
product cost
the cost of inventory purchased for resale
period costs
the selling and admin costs
product costs (manufacturing)
all costs of making the product to be sold by the business
manufacturing product costs typically include
—direct material costs
—direct labor costs
—manufacturing overhead costs
production & factory maintenance supplies are classified as
indirect material costs
indirect labor costs (4)
—manufacturing supervisors
—quality control inspectors
—equipment and maintenance personnel
—designers and engineers
other overhead costs (5)
—rent
—depreciation
—utilities
—insurance
—taxes
manufacturing product costs are accounted for as
part of the cost of INVENTORY
until the product is sold, then the costs are expensed as Cost of Goods Sold
how many phases or categories of inventory in a manufacturing business?
3
What are the 3 phases of inventory?
—Raw Materials Inventory
—Work in Process Inventory (WIP)
—Finished Goods Inventory
What are the 3 categories of cost?
direct material
direct labor
manufacturing overhead
When are the costs of manufacturing transferred to COGS?
upon the sale of a finished good
T/F both direct and indirect materials are included in raw materials inventory
true
All businesses have 2 kinds of costs:
- product
- period
The balance sheet of a manufacturing business will reflect inventory which includes
—finished goods
—work in progress/process
—raw materials
Period costs for a manufacturing business would be included in
selling and admin expenses
Factory utility costs should be included as part of
product cost
—other overhead
—work in process
the salary costs of manufacturing supervisors would be included in
manufacturing overhead costs
indirect material costs are included in
MOC
a service business has what kinds of costs
product & period
What costs are found in a merchandising business?
period costs
product costs
Direct labor costs are incurred in what type of business?
manufacturing
product costs of a merchandising business include
all costs of inventory purchases
T/F admin office supplies are a product cost
false
managerial accounting info tends to be different from business to business based on
management needs
the classification of cost accountant salary depends on
whether the job would be eliminated if the company purchased rather than manufactured its product
Product costs are included in COGS when
finished goods are sold to customers
Direct labor costs are always reflected as expenses
when the product is actually sold
product costs of a MERCHANDISING business include
the cost of inventory purchases
freight costs associated with inventory purchases from suppliers
period costs are also known as
operating expenses
or
selling and admin expenses
product cost is the cost of the
inventory that is purchased for resale
the outflow of inventory is reflected as
COGS
when inventory is sold, the costs becomes an
expense
T/F a product cost is the same as an expense
False
products costs are first assets, then expenses when sold
T/F period costs are first assets
False
period costs are expenses
in a merchandising business, selling and admin expenses are found
on the income statement under operating expenses
Inventory is reflected on a
balance sheet under current assets
COGS is reflected on the
income statement
gross margin is
revenues—COGS
