Chapter 2 - Cost Terms, Concepts, & Classifications

Chapter 2 - Cost Terms, Concepts, & Classifications...

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MGT223 Costs Terms, Concepts and Classifications Chapter Two Learning Objective 1 Identify and give examples Identify and give examples of each of the three basic of each of the three basic cost elements involved in cost elements involved in the manufacture of a the manufacture of a product. product. The Product The Product Manufacturing Costs
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Direct Materials Raw materials that become an integral part of the product and that can be conveniently traced directly to it. Example: Direct Labour Those labour costs that can be easily traced to individual units of product. Example: Manufacturing costs that cannot be traced directly to specific units produced. Manufacturing Overhead Examples: Indirect labour and indirect materials Wages paid to employees who are not directly involved in production work. Examples: maintenance workers, janitors and security guards. Materials used to support the production process. Examples: lubricants and cleaning supplies used in the automobile assembly plant.
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Classifications of Costs Direct Material Direct Labour Manufacturing Overhead Cost Cost Manufacturing costs are often classified as follows: Non-manufacturing Costs Selling Costs Costs necessary to get the order and deliver the product. Administrative Costs All executive, organizational, and clerical costs. Learning Objective 2 Distinguish between Distinguish between product costs and period product costs and period costs and give examples costs and give examples of each.
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Chapter 2 - Cost Terms, Concepts, & Classifications...

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