Standard costing and the related variances is a valuable management tool.If a variance arises, management becomes aware that manufacturing costs have differed from the standard (planned, expected) costs.The Governmental Accounting Standards Board is circulating a pair of exposure drafts proposing accounting and financial reporting guidance pertaining to the capitalization of interest cost along with a proposed Implementation Guide discussing a variety of topics.
Let's assume that your Uncle Pete runs a retail outlet that sells denim aprons in two sizes.
Pete suggests that you get into the manufacturing side of the business, so on January 1, 2017 you start up an apron production company called Denim Works.
Denim Works purchases its denim from a local supplier with terms of net 30 days, FOB destination.
This means that title to the denim passes from the supplier to Denim Works when Denim Works receives the material.
When we make your journal entries for completed aprons (shown below), we'll use an account called Inventory-FG which means Finished Goods Inventory.