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Describe the categories of manufacturing costs and how these costs flow among the inventories and cost...

Describe the categories of manufacturing costs and how these costs flow among the inventories and cost of goods sold.

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Answer #1

There are basically three categories of manufacturig cost

1. Direct material

2. Direct Labor

3. Manufacturing overheads

These cost are related to the product cost .

The Direct material is the raw material inventory before it is used in production

Then direct material used, direct labor and manufacturing overheads are coverted to work in progress inventory

After completion of process it becomes finished goods inventory

When the finished goods inventory is actually sold it becomes cost of goods sold

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