Learning Objectives

1	Identify and give examples of each of the three basic cost elements involved in the manufacture of a product.
2	Distinguish between period costs and product costs and give examples of each.
3	Prepare a schedule of cost of goods manufactured in good form.
4	Explain the flow of direct materials cost, direct labor cost, and manufacturing overhead cost from the point of incurrence to sale of the completed product.
5	Identify and give examples of variable costs and fixed costs and explain the difference in their behavior.
6	Define and give examples of direct and indirect costs.
7	Define and give examples of cost classifications used in making decisions — differential costs, opportunity costs, and sunk costs.
8	(Appendix 2A) Properly classify costs associated with idle time, overtime, and labor fringe benefits.

New in this Edition

A new exhibit, Exhibit 2-3, illustrates how costs flow through inventories.
Focus on Current Practice Boxes dealing with Planet Hollywood and Benetton illustrate how the structure of period and product costs can differ between companies.
The discussion of period and product costs has been strengthened.
The definition of common costs has been clarified.

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