Chapter 2: Student Summary Handout

1. The three types of companies (Today)

a. Service companies

 b. Merchandising companies

c. Manufacturing companies

i. Three types of inventory

1. Raw materials inventory (RM)

2. or! in process inventory ("#)

$. %inished goods inventory (%&)

2. The value chain and its elements

i. Research and development (R')

ii. esign

iii. #roduction or purchases

iv. Mar!eting

v. istribution

vi. ustomer service

$. efining cost

a. ost ob*ects

 b. irect costs and indirect costs

+. osts for internal decision ma!ing and e,ternal reporting (ed)

a. Total costs for internal decision ma!ing

 b. "nventoriable product costs for e,ternal reporting

c. Merchandising companies- inventoriable product costs

d. Manufacturing companies- inventoriable product costs

i. irect materials (M)

ii. irect labor ()

iii. Manufacturing overhead (M/0)

1. "ndirect materials

2. "ndirect labor 

$. /ther indirect manufacturing costs

e. #rime and conversion costs (%ri)

f. dditional labor compensation costs

. "nventoriable product costs and period costs shown in the financial statements

a. Service companies

 b. Merchandising companies

c. Manufacturing companies

i. alculating the cost of goods manufactured and cost of goods sold

d. omparing balance sheets of the three types of organi3ations

4. /ther cost terms used by managers (ed)

a. ontrollable versus uncontrollable costs

 b. Relevant and irrelevant costs

i. ifferential cost

ii. Sun! cost

c. %i,ed and variable costs

d. 0ow manufacturing costs behave

e. alculating total and average costs at different volumes