chapter 30: manufacturing businesses; income statement and statement of financial position

Question 1

explain the purpose of preparing the manufacturing section in the income statement

Answer 1

to calculate the production cost of goods completed

Question 2

differentiate between direct and indirect costs with examples

Answer 2

direct: costs directly linked to the manufacturing of a porduct e.g. raw materials
indirect: costs of manufacturing that aren’t linked directly to a specific product e.g. insurance

Question 3

define prime cost

Answer 3

total cost of direct raw material and direct labour spent on a product in the manufacturing process

Question 4

explain factory overheads

Answer 4

factory costs associated with manufacturing process, but not directly identifiable as part of one of the finished products/production

Question 5

define work in progress

Answer 5

products where the production process has begun but has not been completed at the end of the financial period