Comparing merchandising and manufacturing activities
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Comparing Merchandising and Manufacturing Activities PowerPoint PPT Presentation


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Merchandisers . . . Buy finished goods. Sell finished goods. . Manufacturers . . . Buy raw materials. Produce and sell finished goods. Next Page Click Here. MegaLoMart. Comparing Merchandising and Manufacturing Activities. Next Page Click Here. Direct Materials. Direct Labor.

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Comparing Merchandising and Manufacturing Activities

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Comparing merchandising and manufacturing activities

Merchandisers . . .

Buy finished goods.

Sell finished goods.

Manufacturers . . .

Buy raw materials.

Produce and sell finished goods.

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MegaLoMart

Comparing Merchandisingand Manufacturing Activities


Manufacturing costs

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DirectMaterials

DirectLabor

FactoryOverhead

Manufacturing Costs

The Product


Direct materials

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Direct Materials

Those materials that becomean integral part of the product andthat can be conveniently traced directly to it.

Example:A radio installed in an automobile


Direct labor

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Direct Labor

Those labor costs that can be easily traced to individual units of product.

Example:Wages paid to automobile assembly workers


Factory overhead

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Wages paid to employees who are not directly involved in production.Examples: maintenance workers, janitors and security guards.

Materials used to support the production process. Examples:lubricants and cleaning supplies used in the automobile assembly plant.

Factory Overhead

Manufacturing costs that cannot be traced directly to specific units produced.

Examples:Indirect labor and indirect materials


Balance sheet

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Materials waiting to be processed.

Partially complete products – some material, labor, or overhead has been added.

Completed products awaiting sale.

Balance Sheet

Merchandiser

Current Assets:

  • Cash

  • Receivables

  • Prepaid expenses

  • Merchandise inventory

  • Manufacturer

  • Current Assets:

    • Cash

    • Receivables

    • Prepaid Expenses

    • Inventories

      • Raw Materials

      • Goods in Process

      • Finished Goods


The income statement

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The Income Statement

Cost of goods sold for manufacturers differs only slightly from cost of goods sold for merchandisers.


Manufacturing cost flows

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Manufacturing Cost Flows

Income StatementExpenses

Balance Sheet Inventories

Costs

Material Purchases

Raw Materials

Direct Labor

Goods in Process

FactoryOverhead

Cost of GoodsSold

FinishedGoods

Selling andAdministrative Expenses

Selling andAdministrative

PeriodCosts


Product costs raw materials

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Product Costs – Raw Materials

Beginning inventory is the inventory carried over from the prior period.


Product costs direct materials

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Product Costs – Direct Materials

As items are removed fromraw materials inventory and placed into theproduction process,they are called direct materials.


Product costs total manufacturing costs

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Product Costs – Total Manufacturing Costs

Conversion costs are costs incurred to convert the direct material into a finished product.


Product costs goods in process

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Product Costs – Goods in Process

All manufacturing costs incurred during the period are added tothe beginning balance ofgoods in process.


Product costs cost of goods manufactured

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Product Costs – Cost of Goods Manufactured

Costs associated with the goods that are completed during the period are transferred to finished goods inventory.


Product costs cost of goods sold

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Product Costs – Cost of Goods Sold


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