ACTG 2020 Chapter Notes - Chapter 2: Opportunity Cost, Marginal Revenue, Fixed Cost

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To carry out the main functions: planning, motivation/directing, and control, managers need information which ties to costs. Three categories: direct materials, direct labour, and manufacturing overhead. Direct materials: materials going into final product = raw materials (any materials used in the final product and finished product of one company can become raw materials of another) Car batteries is raw material for bmw: can include both direct and indirect materials. Direct materials: integral part of the finished product and is traceable. Glue used in shoes) are included in manufacturing overhead as a result. Not treated as direct materials because costs of directly tracing. Them to finished product is > than benefits of doing so. Direct labour: labour costs easily *physically and conveniently* traced to individual units of product, called touch labour since direct labour workers typically touch product while it is being made. Manufacturing overhead: 3rd element of mfting costs, includes all costs of mfting except direct materials and direct labour.

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