Professional Documents
Culture Documents
NONMANUFACTURING COSTS
Nonmanufacturing costs defined as all costs
that are not associated with the production of
goods. These costs include selling and general
and administrative costs.
Selling Costs. Selling costs include all the costs
associated with securing and filling customer
orders.
General and Administrative Costs. General and
administrative
costs
are
all
the
costs
associated
with
the
firms
general
management.
Product Costs. Product costs are those costs
assigned to goods produced. Thus, the terms
product costs and manufacturing costs are
used interchangeably.
Period Costs. Period costs are identified with
accounting periods rather than with goods
produced.
Type of Cost
When Expensed
Product Cost
Manufacturin
g Costs
Direct material
Direct labor
Manufacturing
overhead
Period Cost
Nonmanufact
uring Costs
Selling cost
General and
administrative
cost
Expensed in period in
which they are
incurred
Current
Manufactu
ring Costs
Direct Material
Direct Labor
Manufacturing
Ending
Balance in
Work in
Process
Cost
of Goods
Manufactu
red
Direct material
Direct labor
Indirect
Material
Overhead
(Indirect material,
indirect labor)
Beginning
Balance in
Finished
Goods
Cost of
Goods
Manufactu
red
Finished
Goods
Inventory
Income
Statement
Account
Cost of
Cost of goods
goods
sold
manufactur
ed
Ending
Balance in
Finished
Goods
Cost
of
Goods
Sold
Income Statement
For the Year Ended December 31, 2006
Sales
$2,600,000
Less cost of goods sold:
Beginning finished goods
$80,000
Add cost of goods manufactured
2,140,000
Cost of goods available for sale
2,220,000
Less ending finished goods
60,000
2,160,000
Gross profit
440,000
Less nonmanufacturing expenses:
completed but
not yet sold
60,000.0
0
60,000.0
0
10,000.0
0
10,000.0
MANUFACTURING OVERHEAD
0
An overhead allocation rate is calculated by
dividing estimated overhead costs by the
estimated quantity of the allocation base.
The amount of overhead assigned to jobs is
10,000.
00
1,000.0
0
55,000.
60,000.
00
00
60,000.
00
MODERN MANUFACTURING
Here we brieflyPRACTICES
discuss three of the
major
changes: just-in-time production, computercontrolled manufacturing, and total quality
improve