IPPTChap013

3. Contrast direct and indirect costs and illustrate how they relate to a product or activity.
4. Distinguish between product costs and period costs, and identify the three components of product cost.
guards.
▪ Production supervision salaries. ▪ Factory utilities, property taxes, and insurance. ▪ Depreciation for factory buildings and equipment.
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Manufacturers . . .
Buy raw materials. Produce and sell
finished goods.
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Desired ROI
Customer Service
Production
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Marketing
Distribution
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Cost Accumulationห้องสมุดไป่ตู้and
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LO 4
Product Costs
Manufacturing overhead includes all manufacturing costs except raw materials
and direct labor.
Examples
▪ Wages of maintenance workers, janitors, security
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LO2 Value Chain Functions
Research and
Development
Design
The sequence of functions and activities
that, over the life of the product or service, adds value for the customer.
Direct Labor
Manufacturing Overhead
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The Product
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LO 4
Product Costs
Raw materials are the ingredients of the product.
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Product Costs and
LO 4
Period Costs
Income
Balance Sheet
Statement
Costs
Inventories
Expenses
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LO 1
Cost Accounting
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Costs for Cost Accounting
LO 1
Purposes
Financial Accounting
the manufacture of the product.
Example: Wages paid to automobile assembly workers
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Learning Objectives
After studying this chapter you should understand and be able to:
■ Cash ■ Receivables ■ Prepaid Expenses ■ Inventories
Raw Materials Work in Process Finished Goods
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Cost Accounting and Reporting
PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA
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Costs for Cost Accounting
LO 4
Purposes
Merchandiser
Current Assets
Cash Receivables Prepaid Expenses Merchandise Inventory
Manufacturer
Current Assets
9. Perform activity-based costing and describe activity-based management.
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7. Prepare and interpret a statement of cost of goods manufactured.
8. Explain and illustrate the difference between absorption and direct (or variable) costing.
Cost is a measure of resources used or
given up to achieve a stated purpose.
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Managerial Accounting
Costs are assigned to products and become
LO 2
Assignment
Material cost, human labor, machine support,
etc.
Cost objects are products, jobs, and services.
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Example: A radio installed in an automobile
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LO 4
Product Costs
Direct labor is the effort provided by workers who are directly involved with
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Costs for Cost Accounting
LO 4
Purposes
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LO 4
Product Costs
Raw Materials
Material Purchases
Raw Materials
Direct Labor
Manufacturing Overhead
Selling and Administrative
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Work in Process
Finished Goods
Cost of Goods Sold
Indirect costs
Cannot be easily and conveniently traced to a unit of product or other cost object.
Would be incurred even if the product or activity was discontinued.
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