Accounting Unit 2 NOTES.docx

Accounting Unit 2 NOTES.docx - Unit 2 Why does cost...

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Unit 2 Why does cost matter?/Importance of Cost o Determine sales price o Set sales goals o R&D of future product development o What to sell (how much)? What to offer to sell o Constrained Resources Which products do we make based on the resources that we have o Will you have enough money left to cover the marketing of the product? Will you make money off of the product? o What item to “push” employees to sell Job-Order Costing vs. Process Costing Job-Order Costing Process Costing When are they appropriate Unique/customized Mass-produced, generic, homogeneous Ex: shoes, orange soda, Concerned with the “batch” of the item you made What does it cost $10,000 for 1 item $10,000 for 100 items = $100 for 1 item Depreciation o Initial investment becomes asset. It moves more and more to expense. You are slowly “using up” the item over time o The term we use to allocate the asset to PP&E (property plant and expense) Asset Expense $100,000 $95,000 $5,000 $90,000 $5,000 $85,000 $5,000 Direct Material (DM) Direct Labor (DL) Manufacturing Overhead (MOH) o
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