Manufacturing

Question 1

Direct Labour Cost

Answer 1

Wages and salaries of those employees physically making the product or operating the machines making the product

Question 1

Direct/ Raw Materials Cost

Answer 1

Raw materials that have been issued to the factory and have been used to manufacture the finished goods. E.g. leather and rubber soles in the making of shoes

Question 2

Factory Overhead Costs

Answer 2

All other costs involved in the manufacturing process which increase the cost of producing the product.

Question 3

Finished goods stock

Answer 3

Products that are completely finished and are ready for sale

Question 4

Factory indirect materials/consumable stores stock

Answer 4

The indirect materials that have not yet been used and are still available to be used, e.g. cleaning materials left over

Question 5

Raw materials stock

Answer 5

The raw materials left over that have not yet been issued to the factory but are stored safely in the warehouse for future use.

Question 6

Work-in-process stock

Answer 6

Products that have not been completely turned into finished goods and are still in the manufacturing process

Question 7

Fixed costs

Answer 7

These are costs that do not change according to number of products made. For example, the rent of the factory plant will be the same no matter whether 1 000 units are made or 100 000 units are made.

Question 8

Variable costs

Answer 8

These costs will increase when production increases. For example, the cost of raw materials used will be far less if 1 000 units are made compared to if 100 000 units are made.