Costs Are Typically Direct Materials, Direct Labor and Manufacturing Overhead. These Costs Are Not

Magallanes, Victor V.
BSBA 1E
Managerial Accounting
1. Finished Goods Inventory - refers to the number of manufactured products in stock that are available
for customers to purchase. The finished goods inventory formula is an important inventory ratio that
can be used to calculate the value of these goods for sale.
2. Raw Materials Inventory - it is the total cost of all component parts currently in stock that have not
yet been used in work-in-process or finished goods production. There are two subcategories of raw
materials, which are: Direct materials. These are materials incorporated into the final product.
3. Work in Process inventory - refers to the total cost of unfinished goods currently in the
production process at the end of each accounting period. It is also considered a current asset on a
company's balance sheet.
4. Lean production - is a production methodology focused on eliminating waste, where waste is defined

as anything that does not add value for the customer. Although Lean's heritage is manufacturing, it is
applicable to all types of organization and all an organization's processes.
5. Just-in-time manufacturing - minimizes the time, labor, and materials in a manufacturing process. It

does so by only producing goods as they are needed. ... The use of rapid machine setups, so
that production runs can be as short as one unit.
6. Product Cost - is any cost related to creating a product and can be a direct or indirect cost. Product

costs are typically direct materials, direct labor and manufacturing overhead. These costs are not
expensed until the product is actually sold, then it is reported as cost of goods sold on the income
statement.
7. Direct materials - are those materials and supplies that are consumed during the manufacture of a
product, and which are directly identified with that product. ... The bill of materials itemizes the unit
quantities and standard costs of all materials used in a product, and may also include an overhead
allocation.
8. Direct Labor - costs are the costs associated with paying workers to make a product or provide a
service. The workers must be clearly involved in producing the product or providing the service. Direct
labor costs are one of the costs associated with producing a product or providing a service.
9. Manufacturing Overhead - is all indirect costs incurred during the production process.
This overhead is applied to the units produced within a reporting period. Examples of costs that are
included in the manufacturing overhead category are: Depreciation on equipment used in the
production process.
10. Nonmanufacturing Cost - are expenditures not associated with product costs. Since they are not
associated with products, these costs are not allocated to products in the determination of the cost of
ending inventory or the cost of goods sold
11. Cost Flows in a Manufacturing Company - refers to the manner or path in which costs move through
a firm. Typically, the flow of costs is relevant with manufacturing
companies whereby accountants must quantify what costs are in raw materials, work in process,
finished goods inventory, and cost of goods sold.
12. Actual Costing - refers to the amount of money that was paid to acquire a product or asset. This
could be the historical, past, or present-day cost of the product.
13. Normal Costing - are the normal or regular costs which are incurred in the normal conditions during
the normal operations of the organization. They are the sum of actual direct materials cost, actual
labor cost and other direct expense. Example: repairs, maintenance, salaries paid to employees.
14. Product Costs and Period Costs - Product costs are those directly related to the production of
a product or service intended for sale. Period costs are all other indirect costs that are incurred
in production. Overhead and sales & marketing expenses are common examples of period costs.

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Costs Are Typically Direct Materials, Direct Labor and Manufacturing Overhead. These Costs Are Not

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Magallanes, Victor V.

4. Lean production - is a production methodology focused on eliminating waste, where waste is defined

5. Just-in-time manufacturing - minimizes the time, labor, and materials in a manufacturing process. It

6. Product Cost - is any cost related to creating a product and can be a direct or indirect cost. Product

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