ADMS 2510 Chapter Notes - Chapter 2: Finished Good, Matching Principle

• School: York University
• Department: Administrative Studies
• Course: ADMS 2510
• Professor: Alison Beavis

Document Summary

The predetermined overhead rate is determined before the period begins by dividing the estimated total manufacturing overhead cost for the period by the estimated total allocation base for the period. The most frequently used allocation bases are direct labour-hours and machine-hours. Non-manufacturing costs are divided into two categories: (1) marketing or selling costs and (2) administrative costs. Order-filling costs would include shipping, sales commissions, and the costs of finished goods warehouses. The matching principle is based on the accrual concept and states that costs incurred to generate a particular revenue should be recognized as expenses in the same period that the revenue is recognized. Product costs will be present in inventories and cost of goods sold if it is not sold in the same period. Product costs are often called inventoriable costs. Direct labour gets added to the wip and it will not become an expense until the product is sold in the same period.