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Chapter 2

COM 316 Chapter Notes - Chapter 2: Income Statement, Variable Cost, Fixed Cost


Department
Commerce
Course Code
COM 316
Professor
Klatt Margaret
Chapter
2

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Monday, January 11, 2016
COM 316!
COST TERMS, CONCEPTS, AND CLASSIFICATIONS
-Identify and give examples of each of the three basic manufacturing cost categories
Direct Materials: those materials that become an integral part of a finished product and
can be conveniently traced to it
Direct Labour: those factory labour costs that can be traced easily to individual units of
product
Manufacturing Overhead: all costs associated with manufacturing except direct
materials and direct labour (indirect materials, labour, maintenance, repairs, utilities,
taxes, depreciation and insurance, selling and administrative)
-Distinguish between product costs and period costs, and give examples of each
Product costs: all costs that are involved in the purchase or manufacture of goods. In
the case of manufactured goods, these costs consist of direct materials, direct labour,
and manufacturing overhead. *Inventoriable costs
Period costs: all costs that are expensed on the income statement in the period in
which they are incurred or accrued. Selling (marketing) and administrative expenses
are period costs.
-Prepare an income statement, including the calculation of cost of goods sold
See textbook
-Prepare a schedule of cost of goods manufactured
Contains 3 elements of product
costs - direct material, direct
labour, manufacturing overhead
Schedule of cost of goods
manufactured: a schedule showing
the direct materials, direct labour,
and manufacturing overhead costs
incurred for a period and assigned
to work in process and completed
goods.
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