ACCT 1160 CH 10 + 11 Test

Managerial Accounting

Focuses in preparing information that is useful for management

• reported information is not recorded using generally accepted accounting principles

• provides useful information for addressing internal questions

product costs

consist of manufacturing costs

• will be included in the cost of inventory

• direct materials cost, direct labor cost, factory overhead

period costs

cost used in generating revenue during the current period that are not involved in the manufacturing process

• will be reported as an expense on the income statement

• selling expenses, administrative expenses

product costs - direct materials

includes the cost of any material that is an integral part of the finished product

• the cost of materials per unit must be able to be determined or estimated in order to be considered a direct material.

ex. woods being used for guitars

product costs - direct labor

includes the cost of employee wages that is an integral part of the finished product

• cost of labor per unit must be able to be determined or estimated in order to be considered a direct labor

product costs - factory overhead

• costs that do not enter directly into the finished product. this includes the indirect materials and indirect labor and other general costs, such as rent and utilities

• all other manufacturing costs (product costs) other than the direct materials cost and direct labor cost

cost allocation

process by which factory overhead or other costs are assigned to a unit of inventory