Companies that purchase raw materials from other companies and transform those raw materials into a finished product.
Merchandising Companies (p. 16)
Companies that sell products that someone else has manufactured
Service companies (p. 16)
Companies that do not sell a tangible product as their primary business.
Raw materials inventory (p. 18)
Inventory of materials needed in the production process but not yet moved to the production area.
Finished-goods inventory (p. 18)
Inventory of finished product waiting for sale and shipment to customers.
Work in process (WIP) inventory (p. 18)
Inventory of unfinished product (in other words, what is left in the factory at the end of the period).
Lean production ( p. 18)
A system focused on eliminating waste associated with holding more inventory than is required, making more product than is needed, overprocessing a product, moving products (and people) farther than is required, and waiting.
Just-in-time (JIT) manufacturing (p. 19)
The philosophy of having raw materials arrive just in time to be used in production and for finished-goods inventory to be completed just in time to be shipped to customers.
Direct costs (p. 21)
Costs that are directly attached to the finished product and can be conveniently traced to that product.
Indirect costs (p. 21)
Costs that are attached to the product but cannot be conveniently traced to each separate product.
Manufacturing costs (p. 21)
Costs incurred in the factory or plant to produce a product; typically consist of three elements: direct materials,direct labor, and manufacturing overhead.
Direct materials (p. 21)
Materials that can easily and conveniently be traced to the final product.
Direct labor (p. 21)
Labor that can easily and conveniently be traced to particular products.
Manufacturing overhead (p. 22)
The cost of indirect materials and labor and any other expenses related to the production of products but not directly traceable to the specific product.
Indirect materials (p. 22)
Materials used in the production of products but not directly traceable to the specific product.
Indirect labor (p. 22)
Labor used in the production of products but not directly traceable to the specific product.
Nonmanufacturing costs (p. 22)
Costs that include selling and administrative costs.
Period costs (p. 22)
Costs that are expensed in the period incurred; attached to the period as opposed to the product.
Actual costing (p. 25)
A product costing system in which actual overhead costs are entered directly into work in process.
Normal costing (p. 25)
A product costing system in which estimated or predetermined overhead rates are used to apply overhead to work in process.