Unallocated costs li companys statement of operating

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Unallocated Costs Li Company’s Statement of Operating Income 9000, 6000 & 7000 6000, 4000 & 5000 Companies that cannot find cost drivers that are directly related to costs often choose not to allocate the costs Assigning a cost as direct, indirect or unallocated requires judgment . It may be based on the type of cost, its magnitude, and how expensive it is to implement a system to trace cost
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Identifying the main types of Manufacturing Costs Learning Objective 5
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Main types of Manufacturing Costs Manufacturing Costs Direct Material Costs Direct-Labor costs Indirect production costs Manufacturing operations transform raw materials, the basic materials from which a product is made, into other goods through the use of labor and factory facilities.
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Categories of Manufacturing Costs Direct materials include the acquisition costs of all materials that a company identifies as a part of the manufactured goods. Eg. Iron castings, lumber, aluminum sheets, Direct Labor costs include the wages of all labor that can be traced specifically and exclusively to the manufactured goods in an economically feasible way. Eg. Wages of Machine operators, assemblers
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Categories of Manufacturing Costs Indirect production costs includes all costs associated with the production process that the company cannot trace to the manufactured goods in an economically feasible way. Eg: Power, Depreciation , property taxes, supplies, And insurance are examples of indirect costs of production. Minor items, such as tacks or glue, and many labor costs, such as janitors and forklift operators, are considered indirect labor costs and economically infeasible to trace.
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Product Costs and Period Costs Product costs are costs identified with goods produced or purchased for resale. These costs first become part of the inventory on hand, sometimes called inventoriable costs. Period costs are costs that become expenses during the current period without becoming part of inventory These costs are associated with nonproduction value-chain functions (such as R&D, advertising, Distribution, and sales). Most of these costs are reported as selling and administrative expenses.
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Financial Statement of Merchandising and Manufacturing Companies Learning Objective 6
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Merchandise Company (Retailer or Wholesaler) and Manufacturing company Merchandise Company : The product cost includes only the cost to acquire the merchandise it sells. Manufacturing company: Raw-material inventory, Work-in-process inventory and Finished-goods inventory The only accounting difference between manufacturing and merchandising companies is the composition of product costs The period costs never become part of inventory and it is the same regardless of company
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Financial Statement of Merchandising Companies Merchandising Company (Retailer or Wholesaler) Merchandise Purchases Merchandise Inventory Sales - Cost of Goods Sold (Expenses) - Selling Expenses - Administrative Expenses Period Costs Gross Margin Operating Income Product (Inventoriable) Costs Expiration
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Financial Statement of Manufacturing Companies
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