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Chapter 5

Chapter 5

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Department
Accounting
Course
ACC 410
Professor
Vanessa Magness
Semester
Winter

Description
Chapter 5: Job Costing Product Costs and Cost Flows Product Costs: costs involved in either making or purchasing a product (manufacturing, inventorable costs, direct or indirect costs) Period Costs: operating costs that are not part of making or purchasing a product, such as sales and administrative expenses (ex: sales or administrative expenses) Manufacturing companies may have leftover inventories in the raw materials account, work in process account, and the finished goods account at the end of the accounting period Managers need to prepare the cost of goods sold schedule and cost of goods manufactured schedule as a part of preparing the income statement What goes into making the product Direct materials that become part of a product (cost object) Direct labour that includes the wages paid to the operator or assembly worker Manufacturing overhead (includes indirect expenses that go into making the product, such as utilities, machine amortization, plant insurance, maintenance and repair, indirect materials, indirect labour, etc. Prime Costs: direct materials and direct labour Conversion costs: direct labour and manufacturing overhead (these two costs convert materials into finished goods) Calculating Cost of Goods Sold for Merchandising Companies COGS = Beginning merchandise inventory + purchases Ending merchandise inventory Calculating cost of goods sold for Manufacturing Companies COGS = Beginning finished goods inventories + Cost of goods manufactured end finished goods inventory Product Cost Flows raw materials purchased for producti
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