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Understanding Costs: Key Concepts and Classifications in Financial and Managerial Accounting

This session delves into the essential terms and classifications of manufacturing costs in both financial and managerial accounting. We explore direct materials, such as components that become part of a product and can be traced directly to it (e.g., a radio in an automobile), and direct labor, which refers to labor costs easily traced to individual product units (e.g., wages for assembly workers). Gain clarity on these concepts to better analyze and manage manufacturing costs effectively.

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Understanding Costs: Key Concepts and Classifications in Financial and Managerial Accounting

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Presentation Transcript

  1. Session #10 Costs Terms, Concepts and Classifications

  2. Exh. 1-2 Comparison of Financial and Managerial Accounting

  3. DirectMaterials DirectLabor ManufacturingOverhead Manufacturing Costs The Product

  4. Direct Materials Raw materials that become an integral part of the product and that can be conveniently traced directly to it. Example:A radio installed in an automobile

  5. Direct Labor Those labor costs that can be easily traced to individual units of product. Example:Wages paid to automobile assembly workers

  6. End

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