ACCT 2102 Chapter Notes - Chapter 2: Direct Product, Financial Statement, Management Accounting
Document Summary
In a for profit business environment, there are two ways to increase operating income. A company can either increase revenue or decrease costs. In this chapter, we will discuss how costs are categorized in businesses. In later chapters, we will discuss ways to control costs and maximize operating income. materials inventory, work in process inventory, and finished goods inventory products (or services). There are six links in the value chain. new products and improving existing products for production production (manufacturer) of tangible products the accounting for costs differs. merchandise inventory. What are the most common business sectors and their. A company incurs costs at every link in the value chain. Product costs are initially inventoried on the company"s balance sheet as an asset. All links in the value chain should be considered for internal decision making purposes. However, for financial reporting purposes, gaap requires that only costs incurred in the production or purchase link be treated as product costs.