 We'll look at this cost flow a few different times a few different ways but now we want to get an overview of that cost flow so we get an idea of where we're going. We'll then look at the cost flow as we go through a comprehensive problem. When we go through a comprehensive problem however we often start to look at the very specific component that we are on in a fairly long problem. So as we do that we want to get an idea and keep an idea in our heads of what the overall cost flow will be so that we know when we're focusing in on one particular component how it fits into the big picture that'll give us some more context, more motivation to learn the particular step that we are looking at. So whenever we think of manufacturing costs we want to think of materials overhead costs and labor and just about any inventory that we think of not just in terms of if we are the manufacturer they include these items in it. It's easy to think of inventory as materials so if we think of a TV we think of the materials that are in the TV but notice that a lot of that is going to be due to overhead and labor a lot of the cost a lot of the value a lot of what it is we just took the raw materials of a TV that wouldn't amount too much unless they were put together to format a TV. So it's important to know when we do a manufacturing company of course we are providing some of those products some of that value so we have the raw materials we're going to have the overhead we're going to have the labor we're going to have to account for all three of those in the cost of whatever we make we make a TV we got to include all of those in the cost of the TV we have to track all those costs so that we can include them in the cost of our inventory. How will that work then? Well if we start with our materials here clearly we will buy the materials whatever is going to be used to create our TV the plastic and whatnot that are going to be used to create the TV we're going to have those and that's going to be a part of inventory and then we're going to start to work on those and once we do that we're going to put it into what we call working process. So working process is us starting to convert whatever the raw materials are to the finished product the TV. So now our materials over here are going to be taken from the materials and put into a working process as we start the job as we start to get going with the process of making. Now we want to keep in mind that this working process this is going to be an account called working process and when we're thinking about a job cost system we're not going to be able to apply anything to this working process unless we can we can assign it to a job. So if it's within the working process we need to have it be supported by a job and that's going to be similar to if we had say an accounts receivable account we can't apply anything to an accounts receivable account unless we also have a subsidiary ledger and a customer to apply it to. We need to know who owes us the money but when we go to a job cost system for working process it's similar. If I put this materials from the materials to the working process account I need to know which job that we're working on and so that's going to be our criteria. Now if it's direct labor if we're making say let's go back to the guitars if we're making a guitar and we're putting the wood in the guitar we know exactly which guitar the wood's going to. On the other hand if we're talking about some of these materials that we don't know exactly which guitar it's going to things like glue things like small components that are going to be included in the guitar it's not worth us to track exactly which guitar they go to we're not going to get a requisition form and say I need this specific amount of glue to put together this guitar it would be not cost effective to do so. So what we'll do is we'll take some of this material and we'll put it into overhead. We can't put it up here yet we can't put it into the working process account because we don't we can't assign it to a particular job and nothing goes over here until we can assign it to a particular job. This overhead is also going to include any other type of overhead that we have. So when we think of overhead in general these are all types of things that we basically expenses on the warehouse where we make things. So that's going to include things like depreciation on the warehouse if we have a supervisor salary in the warehouse we don't know which job that they're working on so it's going to go into overhead if we have maintenance in the warehouse then all of that's going to go to some inventory but we don't know which job to assign it to so it's going to be in there if we have utilities