Managerial Business
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| 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.
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| 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
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| Job order costing system | companies that manufacture batches of unique or specialized products
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| Process costing system | for the production of similar things
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| direct costs | Allocated directly to the Work-in-Process Inventory account
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| indirect costs | Allocated to the Manufacturing Overhead account
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| 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
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| Job Cost Record | as a company incurs costs related to a job, it adds cost to which then is added to WIP Inventory
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| Finished Goods Inventory | When the job is finished the company totals the cost and transfers the cost from WIP Inventory to....
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| 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....
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| Financial accounting | Reports must follow GAAP, reports audited annually by independent certified public accountants, helps investors make investment decisions
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| Managerial Accounting | Provides detailed reports on parts of the company, helps in planning and controlling operations
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| Prime Cost | Direct Materials + Direct Labor
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| Conversion costs | Direct Labor + Manufacturing Overhead
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| Creditors and Stockholders | External parties for whom financial accounting reports are prepared
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| Controlling | The role managers play when they are monitoring day to day operations and keeping the company on track
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| Managers | Internal decision makers
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| Planning | The management function that involves choosing goals and deciding how to achieve them
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