COST ACCOUNTING CYCLE

Manufacturing Inventory Accounts

 Most manufacturing companies use the perpetual inventory approach.

 Materials Inventory
 Manufacturing Inventory Accounts
 Work in Process Inventory
 Manufacturing Inventory Accounts
 Finished Goods Inventory
Merchandising
Manufacturing
 ELEMENTS OF MANUFACTURING COST

 Direct materials
The cost of material which become part of the product being manufactured and which can be readily
identified with a certain product
 Direct labor
The cost of labor for those employees who work directly on the product manufactured: are classified as direct
labor.
 Factory overhead
Includes all costs related to the manufacturing of a product except direct materials and direct labor.
Manufacturing Cost Flow
COST FLOW - MANUFACTURING FIRMS
COST FLOW - MERCHANDISING FIRMS
COST FLOW - SERVICE FIRMS
Statement of Cost of Goods Manufactured and Sold
Illustration
RECITATION
 MULTIPLE CHOICE
1. Which of the following is not a management function?
a. Constraining
b. Planning
c. Controlling
d. Directing and motivating
 MULTIPLE CHOICE
2. Management accountants would not
a. Assist in budget planning
b. Prepare reports primarily for external users
c. Determine cost behavior
d. Be concerned with the impact of cots and volume of profits
 MULTIPLE CHOICE
3. Indirect labor is a
a. Prime cost
b. Conversion cost
c. Period cost
d. Non-manufacturing cost
 MULTIPLE CHOICE
4. Factory rent is
a. A prime cost and an inventoriable cost
b. A prime cost and a period cost
c. A conversion cost and an inventoriable cost
d. A conversion cost and a period cost
 MULTIPLE CHOICE
5. Examples of factory overhead costs are
a. Lubricants for factory machinery
b. Depreciation of factory machinery
c. Both of the above
d. None of the above
 MULTIPLE CHOICE
6. Cost of goods sold is
a. An expense
b. A period cost
c. Is an asset
d. None of the above
 MULTIPLE CHOICE
7. The wage of a timekeeper in the factory would be classified as
a. Prime cost
b. Direct labor
c. Indirect labor
d. Administrative expense