Manufacturing Cost Flow

Manufacturing Cost Flow - Variable costs = Costs which VARY...

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Product Costing 3 Cost Categories Direct Costs Direct Material – integral part of final product – easily traceable to final product Direct Labor – “touch labor” – Labor required to convert Direct Materials into a finished product Indirect Costs ( Overhead )- costs required to produce final product but not directly traceable to final product • Minor assembly components – fasteners, adhesives, cleansers, etc. • Facility related – property taxes, property insurance, utilities • Personnel related – fringe benefits of factory workers, supervision of factory labor, inspection, training of employees directly involved in production of final product • Must be assigned to final product through some allocation process
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Product Costing Cost Behavior
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Unformatted text preview: Variable costs = Costs which VARY IN TOTAL in direct proportion to CHANGES IN OUTPUT Fixed costs = Costs which DO NOT VARY IN TOTAL to changes in output Mixed Costs = Costs which have BOTH variable & fixed Components Manufacturing Cost Flow Raw Material Inventory Work in Process Inventory Finished Goods Inventory Sold to Customer (Cost of Goods Sold) Inventories = Assets (Shown on Balance Sheet) Income Statement Manufacturing Cost Flow Work in Process Inventory contains unfinished product WIP CONTAINS ONLY: DIRECT MATERIALS DIRECT LABOR APPLIED OVERHEAD Overhead Applied = Predetermined OH Rate X Actual OH Base Incurred As Jobs/Products are completed they are transferred to Finished Goods Inventory...
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Manufacturing Cost Flow - Variable costs = Costs which VARY...

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