DM / DL / MOH
Steel used to manufacture bicycles.
What is Direct Materials?
Costs that are recorded in inventory and expensed only when goods are sold.
What are Product Costs?
Raw materials first move into this inventory account.
What is Work in Process Inventory?
The sum of direct materials, direct labor, and manufacturing overhead.
What are Total Manufacturing Costs?
A manufacturer’s balance sheet reports how many inventory accounts?
What are Three? (Raw Materials, WIP, Finished Goods)
Wages paid to employees who assemble products on the factory floor.
What is Direct Labor?
Advertising and sales commissions fall into this category.
What are Period Costs?
Completed goods are transferred from WIP into this account.
What is Finished Goods Inventory?
Beginning WIP is added or subtracted in computing COGM?
What is Added?
This statement differs most between a manufacturer and a merchandiser.
What is the Income Statement?
Factory machine lubricants that cannot be traced to individual units.
What is Manufacturing Overhead?
True or False: Factory depreciation is a period cost.
What is False?
(It is a product cost via MOH)
When goods are sold, costs move from Finished Goods to this account.
What is Cost of Goods Sold?
Ending WIP is added or subtracted in computing COGM?
What is Subtracted?
This schedule links the factory floor to the income statement.
What is the Cost of Goods Manufactured Schedule?
Salary of the factory manager.
What is Manufacturing Overhead?
(Not physically traceable to units)
This is the key reason product costs are not expensed immediately.
What is that they are part of inventory until goods are sold?
This inventory account appears only on a manufacturer’s balance sheet, not a merchandiser’s.
What is Work in Process Inventory?
COGM measures goods that were completed, not necessarily this
What is Sold?
COGM appears in this section of the manufacturer’s income statement.
What is Cost of Goods Sold?
Salary of a product quality inspector working inside the factory.
What is Manufacturing Overhead?
(Commonly mistaken for direct labor)
A cost that feels “important” but never becomes inventory.
What is a Period Cost?
(Examples: advertising, admin salaries)
This is the correct order of inventory accounts for a manufacturer.
What is Raw Materials → Work in Process → Finished Goods?
Total Manufacturing Costs + Beginning WIP − Ending WIP equals this.
What is Cost of Goods Manufactured?
This is the conceptual difference between COGM and COGS.
What is that COGM measures production, while COGS measures sales?
Only costs that help __________ get through the door and become part of inventory.
What is manufacturing the product?