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
- Normal Costing
- a product costing system in which estimated or predetermined overhead rates are used to apply overhead to work in process
