Manufacturing Accounts

Prime cost, factory overheads, the manufacturing account, work in progress, the transfer to the income statement and manufacturing profit.

Structure of cost

A manufacturer prepares a manufacturing account to find the cost of goods produced. Costs are grouped:

Direct (prime) costs — direct materials + direct labour + direct expenses.

Factory (indirect) overheads — factory rent, power, depreciation of machinery, supervisors' wages.

Work in progress — partly finished goods, adjusted at start and end.

$\text{Prime cost} = \text{Direct materials} + \text{Direct labour} + \text{Direct expenses}$

Create a free account to read this note in full. Every free account gets 2 complete revision notes — no card needed.

Structure of cost

A manufacturer prepares a manufacturing account to find the cost of goods produced. Costs are grouped:

Direct (prime) costs — direct materials + direct labour + direct expenses.

Factory (indirect) overheads — factory rent, power, depreciation of machinery, supervisors' wages.

Work in progress — partly finished goods, adjusted at start and end.

\text{Prime cost} = \text{Direct materials} + \text{Direct labour} + \text{Direct expenses}