Supplies of raw materials

Manufacturing a/c calculate the production cost

A Manufacturing firm (make the product)

Customers

Manufacturing a/c

$

Stock of raw materials as at 1.1.2002 2000

Add : Purchase 12000

14000

Less: Stock of raw materials as at 31.12.2003 6000

Cost of raw materials consumed 8000

Manufacturing a/c for the year ended 31 Dec 2002

$Cost of raw materials consumed 8000Direct wages 2000Prime Cost 10000Factory overhead expenses 6000Total cost of production 16000 Add: Work-in-progress as at 1.1.02 3000 19000Less: Work-in-progress as at 31.12.02 4000Production Cost of good completed c/d 15000

Production Cost of good completed

Prime Cost

(Direct Cost)

Factory overhead expenses

(Indirect cost)

That can be traced back to the items being manufacturing

Eg. Indirect Wages,Lighting, Rent, Depreciation

Eg. Wage, Royalties

Work-in-progress

Store Room

Work-in-progress

Production line

Store Room

Work-in-progress

1.1.2002 31.12.2002

Have not include in prime cost and factory overhead expense

Have included these goods at year start but not those at year end

Trading a/cOpening Stock of $ $ finished good 3890 Sales 100000Add:Production Cost of goods completed b/d 79345 83235Less : Closing Stock of finished goods 4000 Cost of good sold 79235Gross profit b/d 20765 100000 100000

Profit &Loss a/cAdministration Expenses $ $Salaries 4400Rent 200Insurance 70General expenses 1340 6010

Selling & Distribution expensesSalesmen’s salaries 3000Commission on sales 1150Carriage outwards 590 4740 Net Profit 10015

20765

$ Gross profit b/d 20765

20765

Balance Sheet (extract)

Current Assets $

Stock : Raw material 6000

Finished good 10000

Work-in-progress 4000

Manufacturing a/c for the year ended xx/xx/xx

$

Production cost of goods completed X

Manufacturing profit X

_____

X

====

$

Market value of goods completed c/d X

Profit disposal of plant and machinery X

____

X

====

Trading a/c for the year ended xx/xx/xx$

Opening stock of finished goods X

Add:

Market value of goods completed b/d X

Purchases of finished goods X

X

Less:

Closing stock of finished goods X

Costs of goods sold X

Gross Profit c/d X

X

===

Stock loss raw materials X

$Sale

X

____X

====Gross Profit b/d XManufacturing Profit X

Solution:

CCC Ltd.Manufacturing a/c for the year ended 31 December 2003

$

Stock of raw material 1.1.2003 4500 Add: Purchase 8800 Carriage inwards 390 9190 13690 Less: Stock of raw materials31.12.03 5800 Cost of raw materials used (i) 7890

Stock of case 1.1.2003 2250

Add : Purchase 2250

4500

Less : Stock of cases 31.12.2003 1920

Cost of wooden cases uses (ii) 2580

Wages (2250*4/5) 18000

Prime cost (iii) 28470

Factory overhead expenses : (iv)Indirect Wages (2250*1/5) 4500Manger ‘s salary 1650Power 1820Rates 910Lighting (600*1/2) 300Depreciation 20000 29180 57650Add: Work-in-progress 1250 58900Less : Work in progress 31.12.2003 1900Production cost of goods completed c/d (v) 57000

Sales (80*1000) 80000

Less : Production cost of good sold b/d 57000

Gross Profit 23000

Less : Expenses:

Administration expenses 2400

Salesmen’s salaries 5950

Lighting (600*1/2) 300

Carriage outwards 210 8860

Net Profit 14140

Trading &Profit and loss a/c for the year ended 31.12.2003

Tang Sau Lin (10)Wong Wing Yin (14)