Chapter 2 Building Blocks of Managerial Accounting I Types of Business products 1 No Inventory B Merchandising Company suppliers A Service Companies in business to sell intangible services rather than tangible resell tangible products that they buy from sell to consumers 1 Retailers 2 Wholesalers 3 have inventory but just one category buy products from manufacturer then sell to retailers i calculated by cost of goods sold and any freight and tariffs duties C Manufacturing Companies materials into new finished products use labor plant and equipment to convet raw all raw materials used in i Raw Materials Inventory 1 Types of inventory manufacturing other physical materials used within the plant to manufacture the goods ii Work in Process Inventory manufacturing process but not yet complete sold completed goods that have yet to be goods that are part way through the iii Finished Goods Inventory 2 Design 1 Research Development researching and developing new or the activities that add value to the companys products and D Value Chain services improved products or services and the process for producing them for producing them resources used to produce a product or 3 Production or Purchases service or to purchase finished merchandise intended for resale promotional and advertising of products and services 4 Marketing 5 Distribution 6 Customer Service Support provided for customers after the sale delivery of products or services to customers detailed engineering of products and services and the process A Cost Object is anything for which managers want a separate measurement of a Direct Cost b Indirect Cost traced to it is a cost that can be traced to the cost object is a cost that relates to the cost object but cannot be B Total Cost for Internal Decision Making used through the value chain C Inventoriable Product Costs production or purchases stage of the value chain inclide only the cost incurred during the includes the cost of all resources a Period Costs distribution and customer service refer to the other costs i e R D design marketing II Defining Cost cost D Manufactoring Companies Production Costs b Direct Labor a Direct Materials are the primary raw materials that become a physical part of the finished product convert raw materials into the companies products includes all manufacturing costs other than direct materials and direct labor All other indirect costs is the cost of compensating employees who physically c Manufacturing Overhead MOH Imdirect materials Indirect Labor i ii iii Other Indirect manufacturing costs d Prime Costs labor manufacturing overhead e Conversion Costs refer to the combination of direct materials and direct refer to the combination of direct labor and III Costs in financial Statements A Service Companies a No Inventory No COGS B Merchandising Company a Has Inventory Has COGS C Manufacturing Company a Has Inventory Has COGS D See Formulas on Page 60 64 65 66
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