Term
| All companies can be roughly divided into two major types |
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Definition
1. Companies that sell goods (tangible products) – Grocery stores, Auto dealerships, Manufacturing companies etc.
2. Companies that sell services (nontangible products)
– Banks, Airlines, Cruise Lines etc. |
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Term
Companies that sell
Goods can be divided into two types |
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Definition
1. Manufacturing Companies
▪ General Motors
▪ Kellogg’s
▪ Dell
▪ Anheuser-Busch
2. Merchandise Companies
▪ Walmart
▪ Target
▪ Home Depot
▪ Staples
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Term
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Definition
| a sacrifice made, usually measured by the resources given up (i.e. money paid) to achieve a particular purpose |
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Term
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Definition
NO
For example, if I buy a building for $1 million which will be depreciated over 20 years. The cost is $1 million but my expense will be $50,000 per year |
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Term
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Definition
An expired cost. A cost expires when the asset gets used up or when it is sold for the purpose of generating revenue (basically an expense is a cost that gets recognized on the income statement) |
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Term
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Definition
| is a cost incurred in purchasing or manufacturing goods for sale (inventory). Product costs are not recognized as expenses until the inventory is sold...... |
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Term
| When are product costs recognized as expenses? |
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Definition
| When the inventory is sold |
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Term
| When does the product becomes an expense called cost of goods sold? |
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Definition
| when the inventory is sold |
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Term
| What happens to product cost that is not expensed? |
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Definition
| go on the balance sheet as inventory |
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Term
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Definition
| cost assigned to goods that were either purchased or manufactored for resale |
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Term
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Definition
· Research and development costs
· Selling costs
· Administrative costs (President’s salary, office supplies, corporate building etc.) |
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Term
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Definition
| a cost that is associated with a period of time rather than with a product or good being sold. |
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Term
| When are period costs recognized as expenses? |
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Definition
in the time period in which they occur. |
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Term
| Companies that sell services will only have what type of costs? |
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Definition
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Term
| Companies that sell goods will have what type of costs? |
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Definition
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Term
Determine the effects of the following on product costs, period costs, total expenses for the period, net income and ending inventory .....when
Sales commissions are accidentally included with the manufacturing costs |
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Definition
Product Costs: Increase
Period Costs:Decrease
Total Expense for the Period:Decrease
Net Income: Increase
Ending Inventory: Increase |
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Term
Determine the effects of the following on product costs, period costs, total expenses for the period, net income and ending inventory ...when
Manufacturing labor costs are accidentally classified as admin costs |
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Definition
Product Costs: Decrease
Period Costs:Increase
Total Expense for the Period:Increase
Net Income: Decrease
Ending Inventory: Decrease |
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Term
Determine the effects of the following on product costs, period costs, total expenses for the period, net income and ending inventory ...when
The company forgets to record some inventory purchases |
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Definition
Product Costs: Decrease
Period Costs:No Effect
Total Expense for the Period:Decrease
Net Income: Increase
Ending Inventory: Decrease |
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Term
Determine the effects of the following on product costs, period costs, total expenses for the period, net income and ending inventory ...when
The company forgets to record some research and development charges |
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Definition
Product Costs: No Effect
Period Costs:Decrease
Total Expense for the Period:Decrease
Net Income: Increase
Ending Inventory: No Effect |
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Term
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Definition
purchased goods from manufacturers and resell them to consumers (or other merchandise companies) – Just selling, no making. |
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Term
| What do the product costs of merchandise companies consist of? |
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Definition
| the cost to acquire the good (the purchase price) plus any transportation costs. |
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Term
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Definition
convert purchased raw materials into finished goods. Product costs for manufacturing companies consist of the cost to manufacture the finished product. |
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Term
Manufacturing costs can be classified into three main categories: |
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Definition
1. Direct Materials
2. Direct Labor
3.Manufactoring Overhead |
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Term
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Definition
Raw materials that are consumed in the manufacturing process that are economically worthwhile to trace to a product.
Examples include: Rubber for Goodyear, Microchips for Dell, Corn for Kellogg’s etc.
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Term
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Definition
| Manufacturing materials that are insignificant or minor in cost such as glue, solder, paint, nails etc |
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Term
| Where do indirect materials go? |
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Definition
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Term
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Definition
1. The salaries or hourly wages including fringe benefits (health insurance, pension contributions etc.) for personnel who work directly on the manufactured products. |
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