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F5 POA Manufacturing

Manufacturing accounts are financial statements that track costs associated with the production of goods, aiding management in decision-making regarding efficiency and pricing. Key components include direct materials, direct labor, factory overhead, and costs of work in progress and finished goods. These accounts are prepared before the Trading and Profit and Loss account, which deals with administrative and selling costs.

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Leigh Ann Mollineau
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20 views4 pages

F5 POA Manufacturing

Manufacturing accounts are financial statements that track costs associated with the production of goods, aiding management in decision-making regarding efficiency and pricing. Key components include direct materials, direct labor, factory overhead, and costs of work in progress and finished goods. These accounts are prepared before the Trading and Profit and Loss account, which deals with administrative and selling costs.

Uploaded by

Leigh Ann Mollineau
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Manufacturing accounts, also known as cost accounts or production

accounts, are financial statements that track and summarize the costs
associated with the production of goods in a manufacturing company.
These accounts help management make informed decisions about
production efficiency, cost control, and pricing. Here are some key points
to consider when summarizing manufacturing accounts:

1. Direct Materials: This includes the cost of raw materials directly


used or consumed in the manufacturing process.
2. Direct Labour: The cost of labour directly involved in the production
process. This includes wages, salaries, and benefits for workers
directly engaged in manufacturing.
3. Direct Expenses: These are expenses incurred BEFORE production
can take place e.g. Royalties, Licenses
4. Factory Overhead: Also known as indirect costs, factory overhead
includes all other production costs that cannot be directly traced to
the production of goods. This can include indirect materials, indirect
labour (e.g. foreman’s wages, supervisor’s salary) utilities, rent for
the manufacturing facility, depreciation on equipment, and indirect
labour.
5. Prime Cost: The sum of direct materials, direct labour and direct
expense costs, representing the direct costs associated with the
production of goods.
6. Work in Progress (WIP): Represents the value of partially
completed goods still in the production process. It includes the cost
of materials, labour, and overheads for products that are not yet
finished.
7. Finished Goods: The cost of completed products ready for sale. It
includes the total manufacturing cost, including direct materials,
direct labour, and factory overhead.
8. Cost of raw materials used/consumed This is the cost associated
with materials used in the production process
9. Total Cost of Production: The total of Prime cost and Factory
overheads, add opening WIP, less closing WIP
10. The Manufacturing account is done before the Trading and
Profit and Loss account
11. The Manufacturing account deals with manufacturing costs
and the TPL deals with administrative, selling and distribution and
financial charges
12. Some costs are apportioned or shared between the two
statements. For example; if the business has its factory on the same
compound as the office, then the lighting bill has to be shared
between the factory and the office. This means part of the cost will
be allocated to the manufacturing account and part to the TPL

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