Manufacturing Accounts Flashcards
Define manufacturing account
Part of the annual financial statements and is used to calculate the cost of goods produced
What are manufacturing business
Manufacturing business are those that take raw materials and with the help of labour and machinery,turn these raw materials into finished goods
What are the two type of costs
-direct cost
-indirect costs
What is direct costs
-these costs can be traced to the product being manufactured
What are direct costs
These costs can be traced to the product being manufactured
Examples of direct costs
Wages of labour who actually make the product
-direct wages
-raw materials
-royalties
-other direct expenses
What is indirect costs
These are costs which cannot be traced to the product being manufactured yet are still a cost of the factory
Examples of indirect costs (factory overheads)
Wages of cleaner s and supervisors
Rent of the factory
factory electricity
Depreciation of the machinery
What is prime cost
Prime cost is the total of the direct materials,direct labour and direct expenses.it is the cost of the essentials necessary for production
What is cost of production
Cost of production is the prime cost plus factory overheads,adjusted for any work in progress at the start and at the end of the year.it is the total cost of manufacturing the goods completed
How do you calculate prime cost
Direct material + direct labour + direct expenses = prime cost
how do you calculate cost of production
Prime cost + factory over heads = cost of production
