Chapter 16

1. Chapter 16 By: Justin^2, Steve, Robby

2. Manufacturing Overhead • used to record all costs and assign costs to be manufactured Examples: • Indirect materials: factory supplies that do not become a part of the product • Indirect labor costs: supervisor’s salaries, salaries of factory maintenance drivers • Plant occupancy costs: depreciation of factory, insurance and property taxes on buildings, maintenance on buildings • Machinery and equipment costs: depreciation/ maintenance costs • Costs of regulatory compliance: meeting factory safety requirements, disposal of waste products, meeting clean air standards

3. Recording Overhead Costs • Manufacturing account is debited to record any cost classified as overhead: • The account credited will vary depending on the nature of the overhead cost • When recording the purchase of indirect materials, the account credited is Accounts Payable • In recording depreciation on machinery, the account credited is Accumulated Depreciation.

4. Direct and Indirect Manufacturing Costs Direct manufacturing costs are costs that can be traced easily and directly to the specific product Indirect manufacturing costs that are costs are not directly related to the production of a product

5. Work in progress inventory, finished goods inventory, and Cost of Goods sold Work in progress account- used to record the accumulation of manufacturing costs associated with the units of product worked on during the period and allocate the costs from units that are partially completed and completed Once units are completed, cost of manufacturing is transferred from work in progress inventory to finished goods inventory Once finished goods are sold their costs flow from the balance sheet to the income statement and when products are sold their costs are transferred from the finished goods account to the Cost of Goods account