Manufacturing Accounting

What is manufacturing?
1. manufacturing means to make a product whether by hands or by machine or
both.
2. The process of turning raw materials or parts into finished goods.

Types of Product Costs

1. Direct Materials - are raw materials that became part of a finished
product and can be conveniently and economically traced to specific product.
2. Indirect Materials- are materials and other production supplies that
cannot be conveniently or economically traced to specific product.
3. Direct Labor- is the cost of production personnel who are directly
involved in the manufacturing of an item. These employees are identified with a
particular machine or product.
4. Indirect Labor- costs are labor costs for production related activities
that cannot be conveniently and economically traced to products.

Cost of Goods Sold

⁃ is a total of all costs involved in producing an item for sale. This
includes raw materials, production labor and allocated overhead such as electricity
and supervisory labor.

Inventory
⁃ can apply to physical items such as raw materials, manufactured goods
that are either complete or in process or the procedure of physically counting
items on hand.

Scrap
⁃ can be manufactured product that fails to feel quality control demands
and is therefore unable to be sold or it may be used to represent materials that
remain after the process is complete.

Cost Accounting Fundamentals

What is Cost?
⁃ are the monetary value incurred to produce goods and deliver services
to obtain future benefits in a profitable organization.

Product Cost
⁃ the sum of the inputs or resources used in the conversion of raw
materials into finished product.

Direct Cost
⁃ costs that can be obviously and physically travced to a manufacturing
process. Job or order, business unit.

Indirect Cost
⁃ these are costs related to particular cost object but cannot be traced
to that cost object in a economically feasible way.