Final Accounting Beg CHs.

Manufacturing Costs

Direct materials, Direct Labor, and Factory Overhead

Costs Added =

Manufacturing Costs

COGM formula

Total Manufacturing Costs + Beginning WIP - Ending WIP

Why is the beginning WIP added in the COGM Formula?

Because these units are completed within the period

Why is the ending WIP subtracted in the COGM Formula?

Because these units should be completed by the next period

Factory Overhead includes

Indirect Materials, Indirect Labor, and Depreciation of Machinery

Product costs

costs necessary to create product

Types of Product costs are

Prime and Conversion

Prime Cost

direct material and direct labor costs

conversion costs

direct labor + overhead

COGS formula

COGM+ Beginning finished goods inventory - ending goods finished inventory

Net income formula

Revenue - expenses

Overhead costs can or cannot be cost effectively traced to individual jobs

cannot

Over/ Under Applied Overhead?

Calculate Predetermined Rate, Find Applied Cost, Incurred/ Actual - Applied

No Rate or % in Overhead Question?

Overhead / Activity Base X 100

Has Rate or % in overhead question?

Rate X Activity Base

Actual/ Incurred < Applied is

OverApplied and Credit

Actual/ Incurred > Applied is

Underapplied and Debit

Gross Profit

Sales Revenue- COGS

Managers use Cost Accounting System to

control costs and set prices

Cost Accounting Systems

Accumulates Production Costs and Assigns them to Products and Services

Job Order Costing is for

Larger, Unique, Expensive Products

Process Ordering is for

Smaller, Bulk Items

Cost per Equivalent Unit

total costs/ equivalent units of production