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Chapter

Management and Organizational Studies 1023A/B Chapter Notes -Indirect Costs, Gross Margin, Financial Statement


Department
Management and Organizational Studies
Course Code
MOS 1023A/B
Professor
Maria Ferraro

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Pg 75- 86 Cost Flows and Cost Terminology:
Product and Period Costs:
Production costs costs associated with getting products ready for sale
Always appear ABOVE gross margin (=rev product costs)
Include:
o Salaries, equipment maintenance, supplies, depreciation
Period Costs not directly related to the readying of products and services
Include items incurred with the passage of time
o Rent, advertising, customer service, accounting
o Selling and admin costs
Always appear BELOW gross margin
Cost Flows in Service Organizations:
Service firms have non-tangible products
Financial statements provide limited info about opportunity costs
o It is vital to use info on accounting statements in accordance
with nonfinancial info to make the best decision
Financial statements separate product from period costs, BUT,
o combine controllable with noncontrollable costs and
o fixed costs with variable costs
Cost Flows in Merchandising Organizations:
Merchandising firm buy goods and resell substantially the same
product to consumers
Maintain inventory of goods they buy and sell
Inventory Equation:
Distinguishes cost of goods purchased from COGS
o Firms expense the cost of the item only when the item is sold
Equation:
COGS = Cost of Beginning INV + Cost of goods purchased during
period Cost of ending INV
o Use FIFO to determine which inventory gets sold 1st
Income Statement:
Only difference between service firms and merchandising firms in
the Inventory Accnt
Major item is cost of purchasing goods from suppliers
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