Cost Accounting: Manufacturing Costs and Inventory Flows

Vocabulary flashcards covering key terms related to manufacturing costs, inventory accounts, and cost flow concepts discussed in the video.

Direct Materials

Materials that can be traced to the finished product and become part of it.

Direct Labor

Wages of workers who directly touch the product and can be traced to it.

Manufacturing Overhead

Indirect production costs that cannot be traced to a specific product (e.g., indirect materials, indirect labor, utilities).

Indirect Materials

Materials used in production that cannot be traced to a specific product (e.g., lubricants, small supplies).

Plant Utilities

Overhead cost for utilities used in the production facility; part of manufacturing overhead.

Administrative Costs

Non-manufacturing costs such as HR and accounting; not part of product cost; treated as period costs.

Period Cost

Costs expensed in the period in which they are incurred, not included in product cost.

Work in Process (WIP) Inventory

Goods that are in production but not yet complete; include direct materials, direct labor, and allocated overhead.

Finished Goods Inventory

Completed products that have not yet been sold.

Cost of Goods Manufactured (COGM)

Total manufacturing costs incurred to produce goods completed during the period (Beginning WIP + Direct Materials Used + Direct Labor + Manufacturing Overhead − Ending WIP).

Cost of Goods Sold (COGS)

The cost of inventory that was sold during the period.

Cost of Goods Available for Sale

Beginning Finished Goods inventory plus Cost of Goods Manufactured; total inventory available to be sold.

Total Manufacturing Costs

Sum of Direct Materials Used, Direct Labor, and Manufacturing Overhead incurred during the period.

Direct Materials Used

Direct materials purchased minus ending Direct Materials inventory; the amount of direct materials consumed in production.

Beginning Direct Materials

Direct materials on hand at the start of the period.

Ending Direct Materials

Direct materials on hand at the end of the period.

Fixed Costs

Costs that remain constant in total within a relevant production range, regardless of activity level.

Variable Costs

Costs that vary in total with the level of production activity.

Mixed Costs

Costs that have both fixed and variable components (e.g., plant utilities with a fixed base plus a variable portion).