ACCT 2102 1st Edition Lecture 4 Outline of Last Lecture I Basic Business Model Service companies Merchandising companies Manufacturing companies II Value Chain Outline of Current Lecture III Cost IV Financial Statements Current Lecture Building Blocks of Managerial Accounting Chapter 2 Part 2 III How do we assign costs A cost object is thing we want to assign costs to Costs are classified based on function either direct or indirect Assume that we re a manufacturer and our cost object is a unit of product what are the specific categories of inventoriable product costs costs only incurred during the production stage of the value chain that we will incur o Direct Materials DM o Direct Labor DL o Manufacturing Overhead MOH Direct product costs are easily and conveniently traced to the cost object Within direct product costs there are direct materials DM and direct labor costs DL DM primary raw materials that become a physical part of the finished product o For a Prius steel tires engines carpet dashboard instruments etc DL cost of compensating employees who physically convert the raw materials into the company s products These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute o For Toyota wages and benefits of machine operators and technicians who assemble the parts and wire the electronics to build the completed vehicles IV Indirect product costs are the default costs with lots of parts They are also known as manufacturing overhead MOH These include indirect materials indirect labor depreciation rent utilities and taxes How do costs flow through to Financial Statements Product Costs Merchandiser Merchandise Inventory Cost of Goods Sold COGS Manufacturer Raw Materials Inventory RM materials waiting to be used Work in Process Inventory WIP Finished Goods Inventory FG Cost of Goods Sold COGS Period Costs Operating expenses or selling general and administrative expenses
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