ADM 3346 Lecture Notes - Lecture 3: Cost Driver

• School: University of Ottawa
• Department: Administration
• Course: ADM 3346
• Professor: Tiemei L I

Document Summary

Manufacturing concerns produce inventory in-house and calculate cost of goods sold as follows: Beginning inventory + cost of goods manufactured = cost of goods sold + Ending inventory: cost of goods manufactured includes three components: Direct materials used: beginning raw materials + raw materials purchases ending raw materials. Manufacturing overhead (indirect expenses such as indirect labor and materials, Direct labor obtained from the company ledger utilities and rent for the plant, etc: obtained from the company ledger. Cost of goods manufactured cost flow: Q1: how are the costs of products or services accumulated: manufacturing vs. Beginning inventory + purchases = cost of goods sales + ending inventory. Purchases include the cost of the products themselves plus costs such as freight, duty, taxes that are incurred in bringing the inventory to the seller"s location. Job costing is best used when products can be distinguished from one another. Process costing is best used when similar products are massed produced.