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Managerial Business
| Term | Definition |
|---|---|
| Product Costs | Includes costs of purchasing/making a product. Ex: direct materials, direct labor & manufacturing. Recorded as assets on inventory accounts on balance sheet. Doesn't become expense until the company has sold the inventory (COGS) on income statement. |
| Period Costs | non-manufacturing cost. selling & administrative expenses & other other expense such as taxes & interest. Ex: salaries and wages of the accounting staff, rent for the admin building, sales commissions paid to sales reps, utilities paid for marking office |
| Job order costing system | companies that manufacture batches of unique or specialized products |
| Process costing system | for the production of similar things |
| direct costs | Allocated directly to the Work-in-Process Inventory account |
| indirect costs | Allocated to the Manufacturing Overhead account |
| Manufacturing Overhead | costs other than direct materials & direct labor including storing materials, machine setup & cleaning the work area resulting in indirect materials & labor, repair, utilities, rent, insurance, property taxes & depreciation on plant building & equipment |
| Job Cost Record | as a company incurs costs related to a job, it adds cost to which then is added to WIP Inventory |
| Finished Goods Inventory | When the job is finished the company totals the cost and transfers the cost from WIP Inventory to.... |
| Cost of Good Sold, an expense | When the job's units are sold, the costing system moves the costs from FG Inventory, an asset to.... |
| Financial accounting | Reports must follow GAAP, reports audited annually by independent certified public accountants, helps investors make investment decisions |
| Managerial Accounting | Provides detailed reports on parts of the company, helps in planning and controlling operations |
| Prime Cost | Direct Materials + Direct Labor |
| Conversion costs | Direct Labor + Manufacturing Overhead |
| Creditors and Stockholders | External parties for whom financial accounting reports are prepared |
| Controlling | The role managers play when they are monitoring day to day operations and keeping the company on track |
| Managers | Internal decision makers |
| Planning | The management function that involves choosing goals and deciding how to achieve them |
Created by:
normh80
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