Chapter 15
In class
Summary of teacher:
1. Classify costs
- manufacturing costs
- direct costs and indirect costs
- period costs and product costs
- prime costs and conversion costs
A cost is a payment of cash or the commitment to pay cash in the future for
the purpose of generating revenues
Costs are often classified by their relationship to a segment of operations,
called a cost object.
Direct and indirect costs:
1. Direct costs are identified with and can be traced to a cost object
2. Indirect costs cannot be identified with or traced to a cost object
Manufacturing costs:
The cost of a finished product includes
1. Direct materials costs
2. Direct labor costs
3. Factory overhead cost
1. Manufacturing begins with raw materials that are converted into
finished products to be classified as a direct material cost, the cost
must be both of the following:
- An integral part of the finished product
- a significant portion of the total costs of the product
2. The cost of employee wages this is an integral part of the finished
product is classified as direct labor costs
a direct labor cost must meet both of the following:
- an integral part of the finished product
- a significant portion of the total cost of the product
3. Costs other than the direct materials cost and direct labor that are
incurred in the manufacturing process are combined and classified as
factory overhead cost.
In class
Summary of teacher:
1. Classify costs
- manufacturing costs
- direct costs and indirect costs
- period costs and product costs
- prime costs and conversion costs
A cost is a payment of cash or the commitment to pay cash in the future for
the purpose of generating revenues
Costs are often classified by their relationship to a segment of operations,
called a cost object.
Direct and indirect costs:
1. Direct costs are identified with and can be traced to a cost object
2. Indirect costs cannot be identified with or traced to a cost object
Manufacturing costs:
The cost of a finished product includes
1. Direct materials costs
2. Direct labor costs
3. Factory overhead cost
1. Manufacturing begins with raw materials that are converted into
finished products to be classified as a direct material cost, the cost
must be both of the following:
- An integral part of the finished product
- a significant portion of the total costs of the product
2. The cost of employee wages this is an integral part of the finished
product is classified as direct labor costs
a direct labor cost must meet both of the following:
- an integral part of the finished product
- a significant portion of the total cost of the product
3. Costs other than the direct materials cost and direct labor that are
incurred in the manufacturing process are combined and classified as
factory overhead cost.
