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Flashcards do conjunto (16)
- 1What are manufacturing costs?Manufacturing Costs are costs associated with producing one unit of a finished product. These costs are classified into three broad categories: DIRECT MATERIALS, DIRECT LABOUR, AND MANUFACTURING OVERHEAD.
- 2What are Raw Materials?Raw Materials can be finished goods produced by one company that may be used by another producer for their own purpose.
Raw Materials can be further divided into Direct & Indirect Materials. - 3What are Direct Materials?Direct Materials are those that become an integral part of a finished product and they can be physically and conveniently traced back to it.
Ex: The seats that Bombardier uses in its passenger trains come from a subcontractor. - 4What are Indirect Materials?Indirect Materials are those that cannot be directly traced back to the finished product. More particularly, the costs of indirect materials are less significant as compared to the benefits. However, the cost of tracing the dollar value of such materials are huge!
Ex: A solder iron used to fuse wires together, or a glue used for a sticker.
Indirect Materials are a part of Manufacturing Overhead. - 5What is Direct Labour?Direct Labour costs include costs incurred by factory labour that can be traced easily in order to produce individual units of product.
- 6What is Indirect Labour?Conversely, indiret labour costs are those that are harder to trace back to the creation or completion of finished products.
Ex: janitors, supervisors, security personnel, etc.
Indirect Labour is considered a part of Manufacturing Overhead. - 7What are manufacturing overhead costs?Manufacturing Overhead costs include everything except Direct Materials and Direct Labour. Some examples include maintenance and repairs on production equipment, heat and light, property taxes, depreciation, insurance on manufacturing facilities, selling and administrative functions. ONLY those costs associated with operating the production facilities or factories are included in the manufacturing overhead.
Other names for mannufacturing overhead include: indirect manufacturing cost, factory overhead, or factory burden. - 8What is a conversion cost?Conversion Cost = Manufacturing Overhead + Direct Labour
overhead costs and direct labour together convert materials into finished products - 9What is a prime cost?Prime cost = Direct Labour + Direct Materials
- 10What are non-manufacturing costs?Non-manufacturing costs include a) Marketing or Selling costs, and b) Administrative costs.
- 11What are Marketing costs?All costs considered necessary to secure customer orders and deliver the finished product or service to customers. Also called 'order-filling' costs.
Ex: costs for advertising, sales travel, sales salaries or commissions, packing, shipping, cost of finished goods warehouses. - 12What are Administrative costs?Admin costs include all executive, organizational, clerical costs associated with the general management of an organization. Ex: exec compensation, accounting human resources, public relations, etc.
- 13What is the 'Matching principle'?Based on the 'accrual' concept, the matching principle states that the costs incurred to generate a particular revenue should be recognized as 'expenses' in the "same period" that the 'revenue' is recognized. Ex: prepaid insurance for two years is halved into an expense for the current year and the remaining or unused is still considered an asset for the next year.
- 14What are product costs?Product costs are all costs involved in the purchase or manufacture of goods. Also known as 'inventoriable costs'.
- 15Product costs = X + Y + ZDirect Materials + Direct Labour + Manufacturing Overhead
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- Accountant Managerial Accounting FlashCards sobre Definitions , criado por SHIKHAR SURAMPUDI em 12-05-2021.
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- SHIKHAR SURAMPUDI
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