BUS 121 - Managerial Accounting Chapter 2: Cost Terms, Concepts and Classifications I. General Cost Classifications A. Various ways cost can be classified: by function, by behavior, by its being assigned or traced to a particular segment or area, etc. B. Product cost classifications for merchandising and manufacturing concerns. 1. Merchandising: One “Inventory” account 2. Manufacturing: Raw Materials, Work-In-Process, Finished Goods II. Product vs. Period Costs A. Product Costs: Inventoriable costs; those assigned and matched against the production of the company’s products. B. Period Costs: Nonmanufacturing costs that are expensed in the time period in which they were incurred. These include Sales, Marketing, and Administrative costs. C. Manufacturing: Three types of Inventory: (1) RM, (2) WIP, (3) FG. D. Within Work-In-Process (WIP), there are three components of manufacturing costs: 1. Direct Materials – materials that become an integral part of the finished product. These are
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