Financial statements and the reporting of costs - Inventory accounts in manufacturing organizations
3 important questions on Financial statements and the reporting of costs - Inventory accounts in manufacturing organizations
What are direct material costs?
The costs of materials used in making a product that can be conveniently and economically traced to specific units of the product. Some examples of direct materials are the meat and bun in hamburgers, the oil and additives in a gallon of gasoline, and the sugar used in making candy.
What are Direct labour costs?
The costs of the hands-on labor needed to make a prod- uct or service that can be traced to specific units. For example, the wages of production-line workers are direct labor costs.
What are the three methods managers and accountants can use to calculate product unit costs?
Actual costing methodNormal costing method, orStandard costing method
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