Friday, February 12, 2010

Product costs Assigned to Products

Product Costs Assigned in Accounting

In general, costs that are assigned to goods purchased or manufactured for resale is a type of product cost that must be properly categorized by the accountant.

Cost of Goods Sold (COGS): Product costs are recognized by the accountant in the period of sale as an expense called Cost of Goods Sold or COGS

Manufactured inventory (direct costs & overhead): Product cost of manufactured inventory consists of direct material (DM), direct labor (DL), and manufacturing overhead (MOH).

Merchandise Inventory + Shipping: The shipping costs must be included in the product cost of merchandise inventory acquired by a retailer or wholesaler for resale. This is equal to the purchase price+ shipping cost.

Inventoriable costs = The term is used interchangeably with product cost because a product is stored as the cost of inventory until the goods are sold by the company

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