EXPECTATIONS:* Be familiar with the definitions of period and product costs and be able to provide examples* Be familiar with the definitions of direct material, direct labor and overhead costs and be able to provide examples* Be familiar with the components of inventory, the flow of goods through the manufacturing process and be able to construct a statement of cost of goods manufactured* Know what cost drivers are* Be familiar with the definitions of fixed and variable costs, be able to provide examples and be able to differentiate between them. Be mindful that we typically refer to the costs of resourcesused versus the cost of resources supplied.* Be aware that not all costs can be classified as either fixed or variable* Be familiar with the definitions of committed, opportunity and sunk costs and be able to provideexamples

Topic Outline Reading Assignments

40 - 42

I. Meaning of Cost 42 Class Handout

- Definition of Cost HW E2.35*

- Product vs. Period Costs Chart I - study aid HW E2.36*

II. Costs Reported in the Financial Statements 42 - 48 HW E2.36*

- Definition of Prime Cost - Definition of Conversion Cost - Classifications of non-manufacturing (period) costs

III. Stages of Production and Flow of Cost 48 -52 Class E2.33*

- Three categories of inventories of a manufacturing firm HW E2.41*; HW P2.57#

- Schedule of Cost of Goods Manufactured and Sold Chart II - study aid

- Income Statement for a Manufacturer

52 - 61

- Definition of Cost Driver HW P2.60*

- Definition of Activity HW P2.61*

- Fixed vs. Variable Costs Chart I - Study aid HW E2.35*

- Costs of Resources Used vs. Resources Supplied HW E2.36*

- Definition of Committed Costs Chart I - Study aid HW P2.58*

- Definition of Opportunity Costs Chart I - Study aid HW P2.59#

- Definition of Sunk Costs Chart I - Study aid

- Definition of Cost Object - Direct vs. Indirect Costs Chart I - Study aid

- Controllable vs. Uncontrollable

62 - 63

- Treatment of fixed overhead costs

VI. Illustration of Absorption and Variable Costing 63 - 70

- Absorption vs. Variable Costing Handout

* Solutions for these problems contained on Chapter 2 Solutions# To be handed in

Chapter 2: Product Costing Systems: Concepts and Design Issues

Section I. Cost Management and Product Costing Systems - It is critical for a business to know what it costs to provide goods and services to its customers

- How product costs are reported in financials for service firms, retail companies and manufacturing businesses

- What are included in product costs for service firms, retail companies and manufacturing businesses

- Classifications and what are included in manufacturing costs

IV. Cost Management Concepts: Different Costs for Different Purposes

Class Handout; Class E2.42*

Section II. Income Reporting Effects of Alternative Product Costing Systems

We'll look at this after chapter 3

V. What Costs Should be Considered Product Costs?

Class E2.45*; HW P2.46*, handout#

- Reconciliation of Income Under Absorption and Variable Costing

- Effect of Inventory Levels on Income Under Absorption and Variable Costing