BUSI 2201 Chapter Notes - Chapter 3: Management Accounting, Financial Statement, Cost Driver
Document Summary
Management accounting: the process of supplying information to internal users for decision making. Financial statements costs are needed for inventory valuation, computing product lines . Operating decisions, e. g. , pricing decisions, determining profitability of. Product costs: costs spent inside the manufacturing plant. Product costs=direct materials (dm)+ direct labour (dl)+indirect materials (im)+ indirect labour (il)+ other manufacturing costs. Period costs (operating expenses): costs spent outside the manufacturing plant. They are expensed in the period in which they are incurred. Period costs = selling costs + administrative costs. A product costing system is used by manufacturers to compute the product cost by assigning manufacturing costs to individual products (dm+dl+moh) Used by companies that produce large numbers of identical units through a series of uniform production steps. Process costing averages manufacturing costs across all units; each unit costs the same. Cost/unit = total manufacturing cost/number of units. Job order costing is used by companies that produce unique, custom-order products.
