Chapter 2

Chapter 2 - Measuring Product Costs Maher 10e Chapter 2 1...

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Measuring Product Costs Maher 10e Chapter 2 1
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Learning Objectives 1. Understand the nature of manufacturing costs. 2. Explain the need for recording costs by department & assigning costs to products. 3. 4. Know various production methods & different accounting systems each requires . 6. 7. Compare & contrast product costing in service organizations to manufacturing companies. 8. Recognize components of just-in-time (JIT) production methods & understand how accountants adapt costing systems to them . 2
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Product Costs in Manufacturing Companies Direct Materials can be easily traced directly to a product. Direct Labor is labor of workers who transform materials into a finished product. Manufacturing Overhead includes all costs, including indirect materials & indirect labor, not directly traceable to a product. 3
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Classification of manufacturing costs: an exercise The wages of machine operators who work on only one product. The cost of components that are assembled into a final product. The cost of suppliers consumed when maintenance is performed on machines. The cost of training mechanics who service processing machinery. 4
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Purposes of Accounting Systems To record costs by responsibility center (department) for performance evaluation To assign manufacturing costs to units produced (or customers served) for product (or customer) costing. 5
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Basic Cost Flow Equation Beginning + Transfers = Transfers + Ending Balance In Out Balance BB + TI = TO + EB * Recall from financial accounting: Beginning Balance + Additions - Withdrawals = Ending Balance 6
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This note was uploaded on 01/14/2012 for the course ECON 121 taught by Professor Mcdevitt during the Winter '10 term at UCLA.

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Chapter 2 - Measuring Product Costs Maher 10e Chapter 2 1...

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