ACCT 2102 1st Edition Lecture 4 Outline of Last Lecture: I. Basic Business Model Service companies Merchandising companies Manufacturing companies II. Value ChainOutline of Current Lecture: III. Cost IV. Financial StatementsCurrent 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 producto 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 productsThese 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 • 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.IV. 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
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