Notes Chapter 2 - Notes Chapter 2 Cost Terms Concepts and...

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Notes Chapter 2: Cost Terms, Concepts, and Classifications I. General Cost Classifications a. Manufacturing Costs a.i. Raw materials: materials that go into the final product a.ii. Direct Materials: those materials that become an integral part of the finished product and whose costs can be conveniently traced to the finished product (ex. Seats on a bus) a.iii. Indirect Materials: those materials that aren’t as important (ex. Glue) a.iv. Direct Labor: labor costs that can be easily traced to individual units of product. (aka “touch labor” because the workers touch it.) a.v. Indirect Labor: labor costs that cannot be physically traced to the creation of products, or that can be traced only at great cost and inconvenience. b. Manufacturing Overhead b.i. Manufacturing overhead: all costs of manufacturing except direct materials and direct labor. b.i.1. Only costs associated with operating the factory are included in manufacturing overhead.
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