Accounting Chap 2

Planning, Directing & Selling, and Controlling.

establishing a basic strategy, selecting a course of action, and specifying how the action will be implemented.

mobilizing people to carry out plans and routine operations

ensuring that the plan is carried out and modified as circumstances change

concerned with providing information to managers

concerned with providing information to stockholders, creditors, and others who are outside the organization.

any materials that are used in a final product

those materials that become an integral part of the finished product and whose costs can be convenientl traced to the finished product

Materials such as solder and glue and are included as part of manufacturing overhead

consists of labor costs that can easily be traced to individual units of product. Ex. assembly-line workers at Toyota

Labor costs that cannot be physically traced to particular products

Includes all manufacturing costs except direct materials and direct labor. Includes indirect materials, labor, maintenance and repairs. Also heat and light, property taxes, depreciation, and insurance on manufacturing facilities.

Selling Costs and Administrative costs

all costs that are incurred to secure customer orders and get the product to the consumer

all costs associated with general management of an oganization rather than with manufacturing or selling. Ex. executive compensation, general accounting, secretarial, public relations, and similar costs.

all costs included with acquiring or making a product. Ex. direct materials, direct labor, and manufacturing overhead. Generally assigned to an inventory account. Also known as inventoriable goods.

All costs that are not product costs. The sales commissions and rental costs of administrative offices are period costs. They are not included as part of the cost of either purchased or manufactured goods. All selling and admin costs are period costs

sum of direct materials cost and direct labor cost

used to describe direct labor and manufacturing overhead because these costs are incurred to convert materials into the finished product.

materials that are used to make a product

consits of units of product that are only partially complete and will require further work before they are ready for sale to a customer.

consist of completed units of product that have not been sold to customers

beginning balance + additions to inventory - Withdrawals from inventory = Ending Balance

COGS = Beginning finished goods inventory + cost of goods manufactured - ending finished goods inventory

a cost that varies in direct proportion to changes in the level of activity

cost that remains constant, in total, regardless of changes in the level of activity.

range of activity within the assumptions about variable and fixed costs are valed.

can be easily and conveniently traced to a specific cost object.

a cost that cannot easily and conveniently be traced to a specific cost object.