UT Knoxville ACCT 200 - Chapter 10 (25 pages)

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Accounting for Manufacturers Chapter 10 A200 Survey of Accounting University of Tennessee 2 Business Activity Differences Service Businesses Ch 1 3 provide services to customers do not buy or sell goods report no inventory on the balance sheet report no cost of sales expense on the income statement Merchandising Businesses Ch 4 buy finished goods from manufacturers and sell them to customers report Merchandise Inventory on the balance sheet report Cost of Merchandise Sold expense on the income statement Manufacturing Businesses Ch 10 buy the elements to make goods DM DL and FOH and sell them to customers report Raw Materials Inventory Work in Process Inventory and Finished Goods Inventory on the balance sheet report Cost of Goods Sold expense on the income statement 3 General Cost Rules recall Ch 7 All costs are recorded as either Asset on Balance Sheet Capitalize cost if the item will be used in the future to help generate revenue Current asset if it will be used within one year Long term asset if it will be used in longer than one year Expense on Income Statement Expense cost if the item is used up in the current period to help generate revenue 4 Ch 10 Manufacturing Cost Terms Period Costs Product Costs Capitalized as an Asset Inventory on the Balance Sheet Selling Expenses costs supporting product sales this period Direct Materials cost Direct Labor cost Expense on the Income Statement Conversion Costs Factory Overhead cost Total Manufacturing Costs Cost of Goods Sold COGS Expense the DM DL and FOH cost of the goods sold in the current period Administrative Expenses costs of running the office this period 5 Ch 10 Manufacturing Cost Flow Job Order Costing Manufacturing businesses accumulate product costs a To help them set a price for goods that will generate profit we will study pricing in Ch 12 b To control operations costs by department or process compare actual costs to budgeted costs c To develop financial statements cost of ending inventory on balance sheet