2-2
a. Direct materials are an integral part of a
“Cost of Goods Manufactured” in place of “Pur-
finished product and their costs can be conven-
chases.” Also, the manufacturing company iden-
iently traced to it.
tifies its inventory in this section as “Finished
b. Indirect materials are generally small
Goods Inventory,” rather than as “Merchandise
items of material such as glue and nails. They
Inventory.”
may be an integral part of a finished product but
their costs can be traced to the product only at
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