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INTL 4400 (5)


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York University
INTL 4400
David Weitzner

cost: the sacrifice made, usually measured by the resources given up, to achieve a particular purpose. • expense: the cost incurred when an asset is used up or sold for the purpose of generating revenue. ◦ Product cost: cost assigned to goods that were either purchased or manufactured for resale. ▪ used to value the inventory of manufactured goods or merchandise until the goods are sold ▪ Recognized as cost of goods sold ▪ ex: purchase cost of inventory, manufacturing costs, shipping, etc. ▪ Also known as inventorial cost ◦ Period costs: all costs that are not product cost ▪ identified with the period of time in which they are incurred rather than the units of purchased or produced goods ▪ expenses during the time period in which they have incurred ▪ research, selling, administrative, salaries, commission, etc. • Income Statement ◦ product costs (costs of manufactured inventory, for example) are stored in inventory until the time period the products are sold,they become COGS/expense. ◦ Operating expenses are treated as period costs and are expensed during the period in which they have incurred. • Balance Statement ◦ current assets: inventories. ▪ Raw-Material: inventory includes all materials before they are placed into production ▪ Work in process: refers to manufactured products that are only partially completed at the date when the balance sheet is prepared ▪ Finished Good: refers to manufactured goods that are complete and ready for sale. • Mass customization Operations ◦ many standardized components are combined in different ways to produce custom made products to customer order (dell). ◦ high production volume and often use a direct sales approach. • Manufacturing Costs ◦ Direct Material: raw material consumed in the manufacturing process is physically incorporated in the finished product, and can be traced to products conveniently. (after it enters production) ◦ Directo Labour: the costs of salaries, wages, and fringe benefits. ◦ Manufacturing Overhead: all other costs ▪ indirect material: costs for materials required for the production process but do not become an integral part of the finished product ▪ indirect labour: the costs of personnel who do not work directly on the product, but whose services are necessary for the manufacturing process (managers, custodians, security). ▪ Other: all other manufacturing costs that are neither material nor labour costs. ▪ depreciation, taxes, insurance, utilities, costs of operating service departments. ▪ overtime premium ▪ idle time: the time that is not spent productively by an employee
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