Managerial Accounting Basic Cost Concept

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Question 1
Product costs are costs that are associated with manufactured goods until the time period during which products are sold. It involved all costs in acquiring or making a product. These costs consist of direct materials, direct labour and manufacturing overhead. Product costs are initially assigned to an inventory account on the balance sheet. When the goods are sold, the costs are released from inventory as expenses and matched against sales revenue. Since product costs are initially assigned to inventories, they are also known as inventoriable costsSynonym for product costs.. Product costs are assigned to units as they are processed and hence are included in inventories. The flow is from direct materials, direct labour, and manufacturing overhead to Work in Process inventory. As goods are completed, their cost is removed from Work in Process inventory and transferred to Finished Goods inventory which is appear in Balance Sheet. As goods are sold, their cost is removed from Finished Goods inventory and transferred to Cost of Goods Sold. Cost of Goods Sold is an expense on the income statement.

Question 2
Joe Rin is a factory supervisor at Bulan Enterprise. As far as we know, product costs consist of direct materials, direct labour and manufacturing overhead. Since Joe Rin is a factory supervisor, his salary is one of product cost element which is indirect labour which is fall under manufacturing overhead. It is because the costs of personnel who do not work directly on the product but whose services are necessary for the manufacturing process are classified as indirect labour. Other examples are such as production supervisor, security guards and custodial employee. Product costs are assigned to units as they are processed and hence are included in inventories. The flow is from direct materials, direct labour, and manufacturing overhead to Work in Process inventory. As goods are completed, their cost is removed from Work in Process inventory and...
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