المساعد الشخصي الرقمي

مشاهدة النسخة كاملة : Manufacturing accounts



محاسب متخصص
10-21-2014, 10:04 AM
In order to find the profit of a firm which is buying goods for resale, a Trading and Profit and Loss Account is prepared. In the trading section the cost price of the goods sold is compared with the selling price of those goods.

In a firm which is manufacturing the finished goods from raw materials the cost of production must be compared with the sales to find gross profit. What is included in the cost of production?

The cost of production can be divided into 3 elements – materials, labour and overheads.

Materials are the natural resources which are used in the manufacture of any product for example; wool for a coat, cotton for a shirt, gold for a watch.

Labour is the human resource which uses the materials and equipment and is paid wages or salary.

Overheads are other expenses incurred for example; light and heat, rates, depreciation and insurance.

Each of these 3 elements can be classed as either direct or indirect.

A direct cost is one which can be traced directly to the item made. For example: the cloth in a shirt or the wages of the sewing machinist. The total of the direct costs is known as prime cost, the basic cost without which there could be no finished article.



Direct materials + direct wages + direct expenses = prime cost




An indirect cost is one which cannot be directly identified with any particular product for example; electricity or supervisor’s wages. Indirect costs are also known as overheads and add to the cost of production.



Prime cost + factory overheads = cost of production



During the year these manufacturing costs are recorded and controlled by the cost accountant. At the end of the period the total figures are passed to the financial accountant for the preparation of the manufacturing account.

The manufacturing account is drawn up in addition to the trading and profit and loss account and shows the calculation of the factory cost of production. The factory cost of production is carried forward to the trading account where it is compared with sales to find gross profit. The profit and loss section is the same as that of a trading firm.

Preparation of a manufacturing account

The aim in the manufacturing account is to find the factory cost of production – the final figure. The manufacturing account must contain all costs incurred in the factory – and only those. It therefore includes the following:
· direct materials – purchases of raw materials along with any adjustments necessary for example; opening and closing stocks, carriage and returns
· direct wages – including any accruals/prepayments
· direct expenses (if any) – royalties, the preparation of special templates or
designs

These 3 direct costs, added together, give prime cost.

· factory overheads – all indirect expenses incurred in the factory, including any
accruals/prepayments.


Factory overheads added to prime cost give the factory cost of production.



Direct materials

)






+

)






Direct wages

)



=


Prime cost


+

)






Direct expenses

)











Prime cost

)






+

)



=


Factory cost of production


Factory overheads

)










Manufacturing accounts: example 1


The figures below have been provided by School Furnishers plc.

a) Put a tick (3) against those items which are direct costs.

b) Total these to calculate the prime cost.

c) Total the indirect costs (those you have not ticked).

d) Add the indirect costs to the prime cost to find the factory cost of production.











Materials






£




wood for desks and chairs

50,000






machine lubricants (oils)

120






paints and varnishes

3,400






upholstery tweeds

12,600






cleaning materials

200












Labour











joiners’ wages

40,000






metal workers’ wages

11,000






factory supervisors’ salaries

24,000






factory cleaners’ wages

1,500












Other expenses











factory lighting and heating

620






insurance of factory machinery

700






royalties to Ergodesign plc

1,000






depreciation of factory machinery

2,000













Manufacturing accounts: suggested solution to example 1

a)









Materials






£




wood for desks and chairs 3

50,000






machine lubricants (oils)

120






paints and varnishes3

3,400






upholstery tweeds 3

12,600






cleaning materials

200












Labour











joiners’ wages 3

40,000






metal workers’ wages 3

11,000






factory supervisors’ salaries

24,000






factory cleaners’ wages

1,500












Other expenses











factory lighting and heating

620






insurance of factory machinery

700






royalties to Ergodesign plc

1,000






depreciation of factory machinery

2,000















b)
£
£



wood for desks

50,000






paints and varnishes

3,400






upholstery tweeds

12,600






joiners’ wages

40,000






metal workers’ wages

11,000






Royalties to Ergodesign plc

1,000



118,000


Prime cost








c)





machinery lubricants

120






cleaning materials

200






factory supervisor’s salaries

24,000






factory cleaner’s wages

1,500






factory lighting and heating

620






insurance of factory machinery

700






depreciation of factory machinery

2,000



29,140


Indirect costs
(factory overheads)








d)





prime cost

118,000






factory overheads

29,140



147,140


Factory cost of production




Manufacturing accounts: task1

The figures below have been provided by Falkirk Bookbinders plc.

a) Put a tick (3) against those items which are direct costs.

b) Total these to calculate the prime cost.

c) Total the indirect costs (those you have not ticked).

d) Add the indirect costs to the prime cost to find the factory cost of production.











Materials








£




leather for book covers


40,000






ink for book titles


8,000






maintenance materials


6,500






gold leaf for lettering


25,000






parchment for restoring books


20,000













Labour













wages for maintenance workers


64,000






book-binder’s wages


136,800






title writer’s wages


28,000






supervisor’s wages


32,000













Other expenses













insurance of equipment


9,000






electricity


4,200






rent and rates of factory


45,000






depreciation of equipment


25,000




















Manufacturing accounts: task 2

The figures below have been provided by Refreshers plc, manufacturers of bottled fruit drinks.

a) Put a tick (3) against those items which are direct costs.

b) Total these to calculate the prime cost.

c) Total the indirect costs (those you have not ticked).

d) Add the indirect costs to the prime cost to find the factory cost of production.











Materials








£




apples


150,000






sugar


4,200






cleaning materials


5,400






grapes


62,200






staff overalls


18,000






bottles


32,000













Labour













wages of fruit processors


105,000






bottlers’ wages


86,400






quality control staff wages


54,000






packers’ wages


33,500













Other expenses













depreciation of fork lift trucks


20,000






general factory expenses


17,250






gas and electricity


5,300















Manufacturing accounts: example 2

The following figures have been supplied by Woodcraft plc. You are required to calculate the following:

a) cost of raw materials used during the year
b) prime cost
c) factory overheads
d) factory cost of production.














£




Opening stock of raw materials


2,000













Purchases of raw materials


60,000













Closing stock of raw materials


3,000













Factory wages


36,000













Insurance of factory building


900













Depreciation of manufacturing equipment


2,500













Lighting and heating of factory


800













Factory rates


520















Manufacturing accounts: suggested solution to example 2







£


a)
Opening stock of raw materials


2,000





Add purchases of raw materials


60,000








62,000





Less closing stock of raw materials


3,000











Cost of raw materials used


59,000




















b)
Raw materials used


59,000





+ Factory wages


36,000











Prime cost


95,000








c)
Insurance of factory buildings


900





Depreciation of manufacturing equipment


2,500





Lighting and heating of factory


800





Factory rates


520











Factory overheads


4,720








d)
Prime cost


95,000





Total overheads


4,720











Factory cost of production


99,720






Manufacturing accounts: task 3

The following figures have been supplied by Iron Designs plc. You are required to calculate the following:

a) cost of raw materials used during the year
b) prime cost
c) factory overheads
d) factory cost of production.














£




Opening stock of raw materials


20,000













Purchases of raw materials


104,800













Closing stock of raw materials


17,200













Factory wages


122,300













Factory supervision


52,400













Depreciation of factory machinery


48,000













Factory heat and light


4,000













Factory general expenses


16,410




























Manufacturing accounts: task 4

The following figures have been supplied by Pewter Products plc. You are required to calculate the following:

a) cost of raw materials used during the year
b) prime cost
c) factory overheads
d) factory cost of production.














£




Opening stock of raw materials


35,200













Purchases of raw materials


296,380













Closing stock of raw materials


38,410













Factory wages


105,265













Rent of factory buildings


29,200













Depreciation of factory machinery


52,900













Gas and electricity


4,200













Maintenance of factory machinery


16,750




























Manufacturing accounts: example 3


The figures below have been provided by Partygoers plc for the year ended 31 December. You are required to prepare a Manufacturing Account to show the following:

a) cost of raw materials consumed
b) direct wages
c) prime cost
d) total factory overheads
e) factory cost of production.






£




Purchases of raw materials


115,000













Returns of raw materials


580













Opening stock of raw materials


10,000













Closing stock of raw materials


8,800













Direct wages


68,000













Direct wages due


7,400




















Factory overheads













Power


2,400













Insurance of factory buildings


1,300













Insurance of factory buildings prepaid


645













Light and heat


2,100













Depreciation of factory machinery


5,500













Supervisors’ wages


23,200



























Manufacturing accounts: suggested solution to example 3



Manufacturing account of Partygoers plc for year ended 31 December














£
£




Opening stock of raw materials


10,000






+ Purchases of raw materials

115,000







- Returns of raw materials

580



114,420
















124,420






- Closing stock of raw materials


8,800













Raw materials consumed


115,620













Direct wages (68,000+7,400)


75,400













Prime cost


191,020

















+Factory overheads:






Power

2,400







Insurance of factory buildings (1,300-645)

655







Light and heat

2,100







Depreciation of factory machinery

5,500







Supervisor’s wages

23,200



33,855













Factory cost of production


224,875