Manufacturing Account

Which of the following statements do not describe production cost?

• Overhead cost is the cost directly related to the production process

• Direct expenses are expenditure directly related to the production of certain products

• Direct labour cost consist of wages paid to workers who are directly involved in production

• Raw materials are used directly in production and usually included at the beginning of the production process.

The purpose of preparing a manufacturing account is to calculate the _____.

• production cost of goods completed in the period

• production cost paid in the year

• total cost of goods produced

• gross profit on goods sold

Production cost mainly includes _____.

• Raw materials, labour and fuel

• Raw materials, labour and power

• Raw materials, labour and expenses

• Raw materials, labour and depreciation of fixed assets

Production cost of finished goods is the sum of ______ and ______.

• Prime Cost

• Finance Cost

• Factory Overhead

• Distribution Costs

Prime cost includes _________.

• Raw Materials

• Administrative Expenses

• Direct Labour

• Royalties

Answer explanation

Administrative Expenses is included in Profit & Loss (Less: Expenses) part of Income Statement.

Which of the following are included in a Manufacturing Account as direct costs?

• Royalties

• Cost of acquiring raw materials

• Wages paid to production line workers

• Wages paid to production line supervisors

Answer explanation

Wages of supervisors is not directly linked to the production of the goods, hence in Factory Overhead

Prime Cost includes _______.

• Direct Labour

• Direct Expenses

• Factory Overhead Expenses

• Cost of Raw Materials Consumed

Which of the following costs would be classified as factory overhead expenses?

• The cost of depreciation of factory

• The cost maintenance of factory

• The cost of insurance of factory

• The cost of extension to factory

Answer explanation

Cost of Extension to factory is only included in Non-Current Asset (Plant & Machinery)

For a manufacturing firm, in which of the following should the depreciation of office equipment be included?

• Factory Overhead Expenses

• Administrative Expenses

• Distribution Costs

• Prime Cost

Answer explanation

Office Equipment is not involved in Factory's operation (cannot be placed into Manufacturing Account), hence in the Income Statement's Profit & Loss Part (Administrative expenses)

Which of the following are the factory overhead expenses in a Manufacturing Account?

• Manufacturing wages

• Factory loose tools

• Royalties

• Wages of Production Manager

• Maintenance & repairs of Machinery