Glossary of Managerial Accounting chpt 2

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Manufactuing Companies
companies that purchase raw materials from other companies and transform those raw materials into a finished product
Merchandising companies
companies that sell products that someone else has manufactured
Service companies
comanies that do not sell a tangible product as their primary business
Raw Materials Inventory
inventory of materials needed in the production process but not yet moved to the production area
Finished goods inventory
inventory of finished product waiting for sale and shipment to customers
Work in process inventory
inventory of unfinished product (in other words, what is left in the factory at the end of the period)
Just-in-time (JIT) production systems
the philosophy of having raw materials arrive just in time to be used in productions and for finished goods inventory to be completed just in time to be shipped customers
Manufacturing Costs
costs incurred in the factory or plant to produce a product; typically consists of three elements: direct materials, direct labor, and manufacturing overhead
Direct Materials
Materials that can easily and conveniently to traced to the final product
Direct Labor
labor that can easily and conveniently be traced to practicular products
Manufacturing overhead
indirect material and labor and any other expenses related to the production of products but not directly traceable to specific product
Indirect Materials
Materials used in the production of products but not directly traceable to the specific products
Indirect Labor
labor used in the production of products but not directly traceable to the specific product
Nonmanufacturing costs
costs that include selling and administrative costs
Product costs
costs that attach to the period incurred; attached to the period as oppposed to the product
Life-cycle costing
a costing system that includes all the costs incurred throughout a product's life, not just in the manufacturing and selling of the product
Value Chain
the set of activities that increase the value of an organization's products services: research and development, design, production, marketing, distribution, and customer service activities
Actual costing
a product costing system in which actual overhead costs are entered directly into work in process
Normal Costing
a product costing system in which estimated or predetermined overhead rates are used to apply overhead to work in process

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