Ch 2 Spring 2013 - Learning Objective 1 Identify and give...

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Learning Objective 1 Identify and give examples of each of the three basic manufacturing cost categories
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The Product Direct Materials Direct Labor Manufacturing Overhead Manufacturing Costs
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Direct   Materials Example: Tires installed on an automobile Seats installed on the aircraft Electric motor used in the DVD player
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Direct Labor Example: Wages paid to automobile assembly workers Carpenters at the home builder Electricians who install equipment on aircraft
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Manufacturing costs that cannot be traced directly to specific units produced Manufacturing Overhead Examples: Factory utilities; depreciation on factory building and equipment; property taxes and insurance on the factory
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Manufacturing costs that cannot be traced directly to specific units produced Manufacturing Overhead Examples: Indirect materials and indirect labor Wages paid to employees who are not directly involved in production work Examples: maintenance workers, security guards, production supervisors 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 Labor Manufacturing Overhead Prime Cost Conversion Cost Manufacturing costs are often classified as follows:
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Nonmanufacturing Costs Selling Costs Costs to secure the order and deliver the product Administrativ e Costs All executive, organizational, and clerical costs
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Learning Objective 2 Distinguish between product and period costs
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Product Costs Versus Period Costs Product costs include direct materials, direct labor, and manufacturing overhead Period costs include all selling costs and administrative costs Inventory Cost of Good Sold Balance Sheet Income Statement Sale Expense Income Statement
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Learning Objective 3 Understand the differences between variable costs, fixed costs and mixed costs
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Ch 2 Spring 2013 - Learning Objective 1 Identify and give...

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