BU247 Lecture Notes - Lecture 4: Income Statement, Cost Driver, Capacity Utilization
Document Summary
Chapter 4- accumulating and assigning costs to products. In order to compute product costs, management accounting systems should reflect the actual cost flows in an organization. Manufacturing, retail, and service organizations have different patterns of cost flows resulting in different management accounting priorities. Manufacturing costs are classified into three groups: direct materials, direct labor, manufacturing overhead. Materials are withdrawn from raw materials inventory as production begins in process account. The costs are moved from the raw materials account to the work. The manufacturing operation consumes labor and overhead items and these costs are added to the work in process inventory. When manufacturing is completed, the costs are transferred from work in process to the finished goods account. At this stage the goods are finished and are ready for sale. When the goods are sold, their costs are moved from the finished goods account on the balance sheet to the cost of goods sold account on the net income statement.
