Question

Part 2:

Explain the following managerial accounting terms and provide a real-life example for each

accounting term:

administrative expenses and selling expenses

. Explain why each accounting term is

either classified as a product cost or period cost.



Part 3:

Explain the following inventory account and provide a real-life example from three (3) different

manufacturing companies:

raw materials inventory

.



Part 4:

Explain the following inventory account and provide a real-life example from three (3) different

manufacturing companies:

work-in-process inventory

.



Part 5:

Explain the following inventory account and provide a real-life example from three (3) different

manufacturing companies:

finished goods inventory

.



Part 6:

Explain what financial statement

inventory costs

are capitalized to and why. Explain when

inventory costs are incurred as an expense. What account is used to classify inventory costs as an

expense?

Answer 1

As per policy, only one question is allowed to answer at a time, so answer 3 questions of all here :

Part 2)

Administrative expenses are expenses which are incurred to organize and operate the company’s functions. These cost are almost of fixed nature. For example, the salary of employee engaged in organizing of business operations. These are to be classified as period cost because these cost does not affect the production and are of almost fixed nature.

Selling expenses are expenses incurred towards the selling of finished goods. It includes all costs from godown to delivery to customer. For example, the cartage paid for the goods to be transported to customers. These costs are classified as period cost because production of goods are not dependent on selling department expenses.

Part3)

The Inventory account is an account which is maintained to control and quantify the raw-material. The example of raw materials inventory are: Car manufacturer: Metal sheets, pistons,etc., Fan manufacturer : power motors, electric wires,etc. , Computer manufacturer : hard disks, mother board, etc.

Part 4)

The Work in process inventory are the inventory which are left in production /manufacturing process as unfinished on the end of last day of the period. The manufacturing companies where Work in process occurs are : Sugar industry, Fabric industry and Food processing industry.

=================================