flow cost chap 3

flow cost chap 3 - Chapter3: Product Costing and Cost...

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Chapter3: Product Costing and Cost Accumulation in a Batch Production Environment Flow of Costs in Manufacturing Firms Manufacturing costs consist of direct material, direct labor, and manufacturing overhead. The product-costing systems used by manufacturing firms employ several manufacturing accounts. As production takes place, all manufacturing costs are added to the Work-in-Process Inventory account. Work in process is partially completed inventory. A debit to the account increases the cost-based valuation of the asset represented by the unfinished products. As soon as products are completed, their product costs are transferred from Work-in- Process Inventory to Finished-Goods Inventory. This is accomplished with a credit to Work in Process and a debit to Finished Goods. During the time period when products are sold, the product cost of the inventory sold is removed from Finished Goods and added to Cost of Goods Sold, which is an expense of the period in which the sale occurred. A credit to
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flow cost chap 3 - Chapter3: Product Costing and Cost...

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