Textbook Notes (362,896)
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ACCT 2230 (113)
Chapter 2

Managerial Accounting Chapter Two Notes

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University of Guelph
ACCT 2230
Elliot Currie

Chapter Two Cost Terms Concepts and Classifications y General Cost Classifications o Manufacturing CostsManufacturing companies divide manufacturing costs into three broad categories direct materials direct labour and manufacturing overheadDirect Materials y Raw material is any material that goes into the final product y Direct material are those materials that become an integral part of the finished product and that can be physically and conveniently traced to it y Indirect materials are small items of material such as glue and nails These items may become an integral part of a finished product but are traceable to the product only at great cost or inconvenience Direct Labour y Direct labour is those factory labour costs that can be traced easily to individual units of products Also called touch cost since direct labour workers typically touch the product while it is being madey Labour costs that cannot be physically traced to the creation of products or that can be traced only at great cost and inconvenience are termed indirect labour and treated as part of manufacturing overhead along with indirect materials Manufacturing Overhead y Manufacturing overhead includes all costs of manufacturing except direct materials and direct labour Manufacturing overhead includes items such as indirect materials indirect labour maintenance and repairs on production equipment and heat and light property taxes depreciation and insurance on manufacturing facilitiesy Various names are used for ma
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