TOPIC 2: MANUFACTURING

COST CONCEPT AND

COMPONENTS
ANICE WONG K1A2
 Inventory
Valuation

Decision Profit
making Determination

Importance of
cost
information to
management

Operational
Control and
Budgeting
Performance
Assessment

Planning
Difference between costs and expenses

•The expenditure of company’s

Costs resources in order to acquire
assests for the company.

•Costs that were consumed in

Expenses
the current period
COST CLASSIFICATION
Functional

Non-
Manufacturing
manufacturing

Direct material Direct labour Administrative

Selling expense
cost cost expense

Prime cost

Overhead cost

Conversion cost
Classified by cost behaviour

Fixed cost

Costs
Variable cost

Mixed cost
Other classification cost
Indirect Cost
Overhead

Non-
Manufacturing
manufacturing
Indirect Cost
Indirect Cost

Indirect material Indirect labour Administrative

Selling expenses
cost cost expenses

Manager salary, Salary, Depreciation,

Yarn, button, zip
overtime salary commission utilities, rent

Manufacturing:
rent, insurance,
utilities,
depreciation
Differences Between Product Cost and
Period Cost
All costs

Product costs Period costs

Selling Administrative
Direct Materials Direct labour
expenses expenses

Manufacturing
overhead