Session 03 - Session 3 More About Costs and A Little About...

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More About Costs and A Little About Budgets Session 3
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Accounting for Production Costs
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The Flow of Manufacturing Costs – Another Cost Classification Scheme for Manufacturing Firms Product Costs vs. Period Costs Product Costs: (Inventoriable Costs) Sum of the direct and indirect Manufacturing costs that are assigned (traced and allocated) to a product. Product costs "attach“ to the product and, initially, are included in the cost of inventory. Period Costs: All other operating costs are categorized as period costs to be expensed in the same period in which they are incurred. Thus, they are not included in the valuation of inventory.
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Cost of Goods Manufactured vs. Cost of Goods Sold (Capitalize vs. Expense) The flow of product costs for a manufacturing firm: Work-in-Progress Finished Goods Cost of Goods Sold Direct Labor Direct Materials Manufacturing Overhead Product Costs are stored in inventory accounts (as Assets) Until the goods are sold (Expense)
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For a manufacturing entity, recall the “Finished Goods Inventory Equation" from financial accounting: = Beginning Finished Goods Inventory Cost of Goods Sold Ending Finished Goods Inventory Cost of Goods Manufactured +
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Consider the following account balances (in thousands) for the Canseco Company: $26,000 20,000 23,000 75,000 25,000 15,000 9,000 11,000 4,000 93,000 29,000 $22,000 21,000 18,000 Direct materials inventory Work-in-process inventory Finished goods inventory Purchases of direct materials Direct manufacturing labor Indirect manufacturing labor Plant insurance Depreciation – plant building and equipment Repairs and maintenance – plant Marketing, distribution, and customer service costs General and administrative costs End of 2009 Beginning of
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This note was uploaded on 10/06/2010 for the course FNCE 100 taught by Professor Jaffe during the Spring '10 term at UNC Asheville.

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Session 03 - Session 3 More About Costs and A Little About...

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