ACG 2071 Lecture Notes - Lecture 3: Indirect Costs, Matching Principle, Quality Control
4 Sep 2018
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Document Summary
Managers need accurate cost information to make good decisions. Cost object item for which separately compile costs. Key takeaway indirect cost allocations can result in distortions. Indirect costs accuracy of allocations is often uncertain, important issue because inaccurate product costs can mislead managers about profitability. Not always same as year pay cash, due to matching principle (warranty expense) If unsold at end of year, asset on balance sheet. Product costs: costs that are integral to either, purchasing goods (merchandiser, producing goods (manufacturer, record in inventory account, not expense until the goods are sold. Period costs: expense in period incurred, also, called selling, general and administrative expenses (sg&a) Direct materials and direct labor direct costs. Direct materials: primary materials and parts that become physical part of finished goods, can trace to specific units (direct cost, ex: flour in baking bread, sweetener in soft drinks, engines used in manufacturing powerboats.
