MANUFACTURING Flashcards
Direct Material Cost
ALL raw materials used in the manufacturing process to manufacture a final product
Direct Labour Cost
Employees’ wages who are directly involved in the manufacturing process
Prime Cost
Direct material cost + Direct labour cost
Indirect material cost
Any other materials not directly linked to a final product, but necessary in the manufacturing process
Indirect labour cost
Employees not directly involved in the manufacturing process
Factory Overheads
All cost items that HAVE to be paid. It will not change no matter the number of units produced
Variable Costs
All cost items that vary in direct proportion to the number of products produced
Selling and distribution costs
Costs incurred during the selling and distribution process.
Administration costs
Costs incurred during the administration in operating the business
Unit costs
The TOTAL cost of production divided by the number of units COMPLETED in the same period in which costs were incurred
The raw materials stock is purchased and placed in the warehouse.
Dr Raw Materials Stock (asset)
Cr Bank / Creditors Control
The raw materials needed for production (requested by the factory) are transferred (issued) from the warehouse to the factory.
Dr Raw Material Issued (nom a/c)
Cr Raw Materials Stock (asset)
The raw materials are processed during the manufacturing process.
Work-in-progress is unfinished items in the process of being completed
Dr Direct Materials Cost (cost a/c)
Cr Raw Materials Issued
Dr Work-in-Progress Stock (asset)
Cr Direct Materials Cost
The final product is transferred from the factory
to a warehouse for finished products.
It is ready to be sold to clients.
Dr Finished Goods Stock (asset)
Cr Work-in-process Stock
Indirect materials transferred from the warehouse to be used during the manufacturing process,
e.g., lubricants, cleaning materials
Dr Factory Overheads (cost a/c)
Cr Indirect Materials (nom a/c)
