1 / 15

INVENTORY

INVENTORY. Accounting ASW Summer 2007. Manufacturing Accounting. Manufacturing accounting what if you make inventory rather than buying? how do we value inventory/CGS for a manufacturing firm? should include all costs of acquiring the product and making it ready for sale.

asabi
Download Presentation

INVENTORY

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. INVENTORY Accounting ASW Summer 2007

  2. Manufacturing Accounting • Manufacturing accounting • what if you make inventory rather than buying? • how do we value inventory/CGS for a manufacturing firm? • should include all costs of acquiring the product and making it ready for sale

  3. Overview of Manufacturing Firm • Period costs - Selling, general and administrative, etc. • Production costs

  4. Period Costs • Examples - corporate headquarters - marketing, advertising - finance, interest - research and development • Generate period costs charged to expense - just as in a merchandising firm

  5. Product Costs • Identify all relevant costs of “acquiring” • Direct labor • labor costs which can be linked to specific product • typically costs of employees working directly on that product • assigned based on actual labor used

  6. Direct materials • materials costs which can be linked to products • typically major components of the product • assigned based on actual materials used

  7. Overhead--can’t be linked to products • indirect labor • e.g., janitorial, supervisor • indirect materials • e.g., supplies, small components • overhead • e.g., depr., rent, utilities on production facilities • allocate based on “drivers” • e.g., direct labor, direct materials

  8. Are these product or period costs? Cutting-machine operator Factory janitor Factory payroll clerks Factory superintendent General office secretary Guards at the factory gate Inspectors in a factory Factory maintenance workers Factory security guards General office clerks President of the firm Sales manager Raw materials receiving room workers Sweepers who clean a retail store Traveling salespersons

  9. Physical flow • Raw materials into warehouse • Materials and labor on plant floor • Finished product to warehouse • Shipped out when sold

  10. Cost allocation • Cost of materials inputs into raw material inventory when acquired • Cost of materials, labor & overhead into work in process inventory as produced • Total cost incurred into finished goods inventory when completed • Total cost into cost of goods sold at sale

More Related