chapter%202%20-%20ACCT%202332%20-%20spring%202010

chapter%202%20-%20ACCT%202332%20-%20spring%202010 - CHAPTER...

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CHAPTER 2 CHAPTER 2 Job-Order Costing for Job-Order Costing for Manufacturing Manufacturing And And Service Companies Service Companies
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Merchandising and Manufacturing Merchandising and Manufacturing Firms Firms
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Balance Sheet Presentation of Product Balance Sheet Presentation of Product Costs Costs Raw Materials Inventory Cost of materials on hand used to produce a company’s products Work in Process Inventory Inventory account for the cost of goods that are only partially completed Finished Goods Inventory Account for the cost of all the items complete and ready to sell
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Cost Classifications for Manufacturing Cost Classifications for Manufacturing Firms Firms Manufacturing Costs Also known as product costs All costs associated with the production of goods Nonmanufacturing Costs Also known as period costs All costs not associated with the production of goods
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costs expensing costs expensing Only manufacturing (product) costs are added to the value of inventory (just like purchases in a merchandising company). These costs become expenses when inventory is sold = cost of goods sold. Nonmanufacturing (Period) costs are expensed in the period they are incurred. Example: depreciation of manufacturing equipment is included in manufacturing overhead but depreciation of office furniture is “depreciation expense” of the period.
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Manufacturing Costs Manufacturing Costs Direct Material Cost Cost of all materials directly traced to items produced Direct Labor Cost Cost of labor directly traced to items produced Manufacturing Overhead Cost of manufacturing activities other than direct materials and direct labor (lights in factory, depreciation of machines, insurance of factory etc.)
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Nonmanufacturing Costs Nonmanufacturing Costs Selling Costs All costs associated with securing and filing customer orders General and Administrative Costs All costs associated with the firm’s general management
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Which of the following is a product cost and so Which of the following is a product cost and so would be included in the cost of inventory? would be included in the cost of inventory? 1 2 3 4 50% 0% 0% 50% 1. Office supplies for the treasurer’s office. 2. Salaries of the mailroom employees. 3. Insurance premiums for factory building. 4. Sales commissions to the companies sales’ agents.
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Flow of Product Costs in Accounts Flow of Product Costs in Accounts cost of goods manufactured : the cost of goods that their manufacturing was finished and they were transferred from work-in-progress to finished goods.
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Example: Glass factory Example: Glass factory 2010 results 2010 results a) What is the cost of goods manufactured? b) What is net income for 2010?
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Cost of Goods Manufactured Cost of Goods Manufactured Cost of Goods Manufactured includes all costs of goods completed during the period.
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C C ost of Goods Sold ost of Goods Sold Cost of Goods Sold :
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Cost of goods sold is always lower than cost of goods manufactured? manufactured?
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This note was uploaded on 05/06/2010 for the course ACCT 2332 taught by Professor Howard during the Spring '10 term at University of Texas-Tyler.

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chapter%202%20-%20ACCT%202332%20-%20spring%202010 - CHAPTER...

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