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Chapter02 - Chapter 2 concepts 1 WHAT IS A COST A cost is...

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Chapter 2 concepts 1. WHAT IS A COST? cost  is the sacrifice made  to achieve a particular purpose. An  expense  is defined  as the cost incurred  when  an asset is used  up  or  sold for the purpose of generating  revenue.   Costs classified by timing: Product costs  are the costs of goods manufactured  or the cost of  goods purchased  for resale.     Period costs  are all other non-product  costs in an organization  (e.g.,  selling and  administrative).   Product costs on the balance sheet are found  in three inventory  accounts:   Raw materials— materials   that await production Work in process— partially   completed  production Finished goods— completed   production  that awaits sale EXAMPLE: ABC company  manufactures  a portable radio designed  for mounting  on the wall of the  bathroom.  The following  list represents some of the different types of costs incurred  in  the manufacture  of these radios: 1) The plant manager's salary. 2) The cost of heating  the plant. 3) The cost of heating  executive offices.
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