Assume you have just taken a position as controller for a new company that manuf

Question

Assume you have just taken a position as controller for a new company that manufactures and sells wrought iron wall hangings. Although the founder of the company, who is the president and CEO, is a great artisan, she has very limited knowledge of accounting.
Instructions:
To help your new boss better understand accounting for a manufacturing organization, prepare a response to hr in which you:(1) identify, (2) describe, and (3) provide examples of the three manufacturing costs and the three inventory accounts used in accounting for a manufacturing company.

Explanation / Answer

the accounting principles regarding manufacturing costs and inventory are : Manufacturing companies have several different accounts compared to service and merchandising companies. These include three types of inventory accounts—raw materials, work-in-process, and finished goods—and several long-term fixed asset accounts. A manufacturing company uses purchased raw materials and/or parts to produce a product for sale. At a point in time, the company's inventories consist of raw materials, those materials and parts waiting to be used in production; work-in-process, all material, labor, and other manufacturing costs accumulated to date for products not yet completed; and finished goods, the cost of completed products that are ready to be sold. The value of each type of inventory is disclosed in a company's financial statements. The amounts may be shown individually on the face of the balance sheet or disclosed in footnotes.

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