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UNIT 07 Manufacturing
UNIT 07 Manufacturing
MANUFACTURING ACCOUNTS
INTRODUCTION
Manufacturing account is prepared to determine the cost incurred for the
production process during a certain period of time.
Manufacturing account ;
………………………………………………………………………………………………………………………
………………………………………………………………………………………………………………………
………………………………………………………………………………………………………………………
I. ……………………………………………………………..
II. ……………………………………………………………..
III. ……………………………………………………………..
These elements can also be categorized as direct and indirect.
Direct cost
………………………………………………………………………………………………………………………
………………………………………………………………………………………………………………………
………………………………………………………………………………………………………………………
Indirect cost
………………………………………………………………………………………………………………………
………………………………………………………………………………………………………………………
………………………………………………………………………………………………………………………
Total of direct cost is known as PRIME COST.
Total of indirect cost is known as OVERHEADS COST.
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Direct costs (prime cost)
The cost that can be specifically identified with a cost unit.
Direct cost is the cost that ;
I. …………………………………………………………………………………………………………….
II. …………………………………………………………………………………………………………….
III. ……………………………………………………………………………………………………………
Direct material cost
Eg: …………………………………………………………………………………………….
Direct labour cost
Eg: ……………………………………………………………………………………………..
Direct expenses
The expenses other than direct material or direct labour which are directly
attributable to a specific cost unit.
Eg: …………………………......................................................................
II. …………………………………………………………………………………………………………….
III. ……………………………………………………………………………………………………………
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Indirect material cost
Eg: …………………………………………………………………………………………….
Indirect labour cost
The payments made to employees who are not directly involving in the
manufacturing process.
Eg: ……………………………………………………………………………………………..
Indirect expenses
The cost other than direct costs, indirect materials and indirect labour costs.
Eg: …………………………......................................................................
Total cost
Total cost of a product consists of :
I. ………………………………………………………………………………………………………………
………………………………………………………………………………………………………………
…………………………………………………………………………………………………………….
II. ………………………………………………………………………………………………………………
………………………………………………………………………………………………………………
………………………………………………………………………………………………………………
………………………………………………………………………………………………………………
………………………………………………………………………………………………………………
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Cost per unit (unit cost)
Unit cost can be calculate as follows.
1. ……………………………………………………………………………………………………………..
2. ………………………………………………………………………………………………………………
3. ………………………………………………………………………………………………………………
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Format for a manufacturing account
Navindu’s business
Manufacturing account
For the year ended 31/03/2020
Raw materials consumed
Opening stock
Add – purchases
Custom duties
Carriage inwards
Direct labour
Direct expenses
Prime cost
Production overheads
Electricity
Factory rent
Factory insurance
Machinery maintenance
Machinery depreciation
Manufacturing cost
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Practice questions
1) By considering following information of Nadun’s business, calculate
I. Prime cost
II. Total manufacturing cost
III. Total cost
IV. Cost per unit
V. Profit per unit
VI. Selling price per unit
Information: (Rs.)
Direct materials 160 000
Other direct costs 20 000
Other overheads 50 000
Direct labour 40 000
Production overheads 30 000
Total units produced 1000 units
Profit on cost 25%
2) Following information was extracted from Hasini’s business for the year ended
31/03/2020.(Rs.)
Work in progress on 01/04/2019 90 000
Work in progress on 31/03/2020 80 000
Direct materials used 890 000
Direct labour 122 000
Factory overheads 508 000
Find the cost of goods manufactured during the year ended 31/03/2020.
3) Following information was extracted from Hasini’s business for the year ended
31/03/2020.(Rs.)
Work in progress on 01/04/2019 260 000
Work in progress on 31/03/2020 190 000
Direct materials used 990 000
Direct labour 610 000
Royalty expenses 200 000
Production overheads 800 000
Find the cost of goods manufactured during the year ended 31/03/2020.
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