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Managerial Accounting and Cost - Part 01

The document discusses different types of manufacturing costs including direct materials, direct labor, and manufacturing overhead which are considered product costs. It also discusses period costs which include selling costs and administrative costs. It provides examples of each type of cost and distinguishes between product costs and period costs.

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Sittie Sarah Bangon
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46 views1 page

Managerial Accounting and Cost - Part 01

The document discusses different types of manufacturing costs including direct materials, direct labor, and manufacturing overhead which are considered product costs. It also discusses period costs which include selling costs and administrative costs. It provides examples of each type of cost and distinguishes between product costs and period costs.

Uploaded by

Sittie Sarah Bangon
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Managerial Accounting and Cost  Period costs - include all selling costs and

Concepts administrative costs.


Expense
Chapter 2

Learning Objective 2-1


Income Statement
Identify and give examples of each of the three basic
manufacturing cost categories.
Quick Check ✔
Which of the following costs would be considered a
Classifications of Manufacturing Costs:
period rather than a product cost in a manufacturing
Direct Materials, Manufacturing Overhead, Direct Labor
company?
A. Manufacturing equipment depreciation.
 Direct Materials - Raw materials that become an
B. Property taxes on corporate headquarters.
integral part of the product and that can be conveniently
C. Direct materials costs.
traced directly to it.
D. Electrical costs to light the production facility.
Example: The flour in the dough.
E. Sales commissions.
 Direct Labor - Those labor costs that can be easily
traced to individual units of product.
Classifications of Costs
Example: Wages paid to bakers.
 Manufacturing Overhead - Manufacturing costs that
Manufacturing costs are often classified as follows:
cannot be easily traced directly to specific units produced.
Examples: Indirect materials and indirect labor
 Indirect material - Materials used to support the Direct Direct Manufacturing
production process. Material Labor Overload
Examples: lubricants and cleaning supplies to maintain
the bakery equipment.
 Indirect Labor – Wages paid to employees who are
not directly involved in production work.
Prime Conversion
Examples: clean-up workers, janitors, and security
guards. Cost Cost
Prime
Classification of Nonmanufacturing Costs:
 Selling Costs - Costs necessary to secure the order and
deliver the product. Prime Cost - the total direct costs of production, including
 Administrative Costs - All executive, organizational, raw materials and labor. Indirect costs, such as utilities,
and clerical costs. manager salaries, and delivery costs, are not included in
prime costs. The prime cost equation is equal to the cost of
Learning Objective 2-2 raw materials plus direct labor.

Distinguish between product costs and period costs and


give examples of each.

Product Costs versus Period Costs

 Product costs include direct materials, direct labor, and Conversion costs are the total of direct labor and factory
manufacturing overhead. overhead costs. They are combined because it is the labor
and overhead together that convert the raw material into the
Inventory Cost of Goods Sold
finished product.
Sale

Balance Sheet Income Statement

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