Slides calculate cost of goods manufactured

Cost Accounting Terminology• Direct Costs • MATERIALS and LABOR that can be identifiedidentified with a particular product or process • Example: Lumber and hardware for furniture... Cost

Calculate Cost of Goods

Manufactured

Terminal Learning Objective

• Task: Calculate Cost of Goods Manufactured

• Condition: You are a cost advisor technician with

access to all regulations/course handouts, and

awareness of Operational Environment

(OE)/Contemporary Operational Environment

(COE) variables and actors.

• Standard: with at least 80% accuracy.

• Explain terminology

• Differentiate between product and period costs

• Identify key elements in Inventory chain template

• Solve for missing variables in Inventory chain template

Input 

Output 

What is the Cost of the

Output?

Cost Accounting Terminology

• Direct Costs

• MATERIALS and LABOR that can be identifiedidentified

with a particular product or process

• Example: Lumber and hardware for furniture

Cost Accounting Terminology

• Direct Costs

• MATERIALS and LABOR that can be identifiedidentified

with a particular product or process

• Example: Lumber and hardware for furniture

Cost Accounting Terminology

• Direct Costs

• MATERIALS and LABOR that can be identifiedidentified

with a particular product or process

• Example: Lumber and hardware for furniture

Cost Accounting Terminology

• Direct Costs

• MATERIALS and LABOR that can be identifiedidentified

with a particular product or process

• Example: Lumber and hardware for furniture

Cost Accounting Terminology

• Direct Costs

• MATERIALS and LABOR that can be identifiedidentified

with a particular product or process

• Example: Lumber and hardware for furniture

Cost Accounting Terminology

Cost Accounting Terminology

Cost Accounting Terminology

• Manufacturing Overhead

• An AGGREGATION of indirect

production-related costs

• Will be ASSIGNED to products or processes and

become part of the cost of the product

Cost Accounting Terminology

Cost Accounting Terminology

3050 

Cost Accounting Terminology

• Product Costs

• All costs incurred in the PRODUCTION of goods

• Examples: Flour, sugar, baker’s wages, cost of operating and maintaining bakery equipment

• Must be CAPITALIZED to the inventory account

• Will only be reported as an EXPENSE when the product is sold

Cost Accounting Terminology

• Product Costs

• All costs incurred in the PRODUCTION of goods

• Examples: Flour, sugar, baker’s wages, cost of operating and maintaining bakery equipment

• Must be CAPITALIZED to the inventory account

• Will only be reported as an EXPENSE when the product is sold

Cost Accounting Terminology

• Product Costs

• All costs incurred in the PRODUCTION of goods

• Examples: Flour, sugar, baker’s wages, cost of operating and maintaining bakery equipment

• Must be CAPITALIZED to the inventory account

• Will only be reported as an EXPENSE when the product is sold

Cost Accounting Terminology

• Product Costs

• All costs incurred in the PRODUCTION of goods

• Examples: Flour, sugar, baker’s wages, cost of operating and maintaining bakery equipment

• Must be CAPITALIZED to the inventory account

• Will only be reported as an EXPENSE when the product is sold

Cost Accounting Terminology

• Product Costs

• All costs incurred in the PRODUCTION of goods

• Examples: Flour, sugar, baker’s wages, cost of operating and maintaining bakery equipment

• Must be CAPITALIZED to the inventory account

• Will only be reported as an EXPENSE when the product is sold

Cost Accounting Terminology

• Will be reported as expenses on the Income

Statement in the period incurred

• May be allocated to products for managerial

purposes

Check on Learning

• The cost of utilities for the manufacturing

facility would be a product or a period cost?

• The cost of utilities for the retail sales outlet would be a product or a period cost?

• Period costs are reported on which financial statement?

Check on Learning

• Which category of cost includes all production costs except Direct Materials?

• Raw Materials Inventory

• Includes purchase cost of Direct Materials held

in inventory

• Examples?

Types of Inventories

• Work in Process Inventory

• Includes Direct Materials costs and capitalized labor and overhead costs of unfinished goods

• Examples?

• Finished Goods Inventory

• Includes Cost of Goods Manufactured

by the seller

• Examples?

The Inventory Chain

The Inventory Chain

The Inventory Chain

The Inventory Chain

The Inventory Chain

The Inventory Chain

Overhead

The Inventory Chain

Overhead

The Inventory Chain

Overhead

Input-Output Equation

Beginning + Input – Output = End

If you take more water out of the

bucket than you put in, what happens to the level

in the bucket?

Using the Inventory Chain

Using the Inventory Chain

Using the Inventory Chain

Using the Inventory Chain

Using the Inventory Chain

Using the Inventory Chain

Using the Inventory Chain

Practical Exercise

Accounting for Manufacturing

Spreadsheet

Enter the information given in the exercise above into the white blanks in the T-

accounts

Accounting for Manufacturing

Spreadsheet

The “Results” tab displays the calculations using the given data

Accounting for Manufacturing

Spreadsheet

“Solve” indicates that the value displayed has been calculated using the

information given in the Data Input tab.