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Product Versus Period Costs
Another way to look at manufacturing costs is to think of them as attaching to a product. In other words, goods result from the manufacturing process and "product costs" are the summation of direct labour, direct materials, and factory overhead. This is perhaps simple enough to understand. But, how are such costs handled in accounting records?
To create your understanding of the answer to this question, think back to your prior studies about how the retailer accounts for its inventory costs. When inventory is purchased/buy, it constitutes benefit on the balance sheet which is the "inventory". This inventory remains as the benefit until the goods are sold, at which point inventory is gone, and cost of inventory is transferred to the cost of goods sold on income statement to be matched with the revenue from the sale.
By analogy, a manufacturer pours money into the direct materials, manufacturing direct labour and overhead. Should this spent money be expensed on income statement immediately? No! This collection of the costs constitutes the benefit on the balance sheet ("inventory"). This inventory remains as benefit until the goods are sold, at which point the inventory is gone, and the cost of the inventory is transferred to cost of goods sold on income statement (to be matched with revenue from sale). There is small difference between a retailer and the manufacturer in this regard, except that the manufacturer is acquiring its inventory via a series of expenditures (for material, labour, etc.), somewhat than in one fell swoop. What is significant to note about product costs is that they attach to inventory and are thus said to be the "inventorial" costs.
Storage and Issue of Material A number of questions are relevant in this control of materials throughout storage and question of materials. These are as: a) Stock control r
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Limitations of abc analysis
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Current assets 180.00 232.00 Less: Current Liabilities 80.00 105.00 Working Capital
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The credit term from the supplier is 2/30, net 60. Requirements: Write the calculation Determine the effective annual rate if the firm does not take the discount.
Decision Making Nature of Decision-making Decision-making may fall into any type of the following categories as: 1. Short run operational decisions 2. Short run t
value of which items are required to be put in a simple format of manufacturing a/c.
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