Supplies of raw materials
A Manufacturing firm (make the product)
Customers
Manufacturing a/c  calculate the
production cost
Manufacturing a/c
Stock of raw materials as at 1.1.2002
Add : Purchase
Less: Stock of raw materials as at 31.12.2003
Cost of raw materials consumed
$
2000
12000
14000
6000
8000
Manufacturing a/c for the year ended 31 Dec 2002
$
Cost of raw materials consumed
8000
Direct wages
2000
Prime Cost
10000
Factory overhead expenses
6000
Total cost of production
16000
Add: Work-in-progress as at 1.1.02
3000
19000
Less: Work-in-progress as at 31.12.02
4000
Production Cost of good completed c/d 15000
Production Cost of good completed
Prime Cost
Factory overhead expenses
(Direct Cost)
(Indirect cost)
Eg. Wage,
Royalties
Eg. Indirect Wages,
Lighting, Rent,
Depreciation
That can be traced back to the
items being manufacturing
Work-in-progress
31.12.2002
1.1.2002
Production line
Store Room
Work-in-progress
Have not include in prime
cost and factory overhead
expense
Store Room
Work-in-progress
Have included these goods at
year start but not those at year
end
Trading a/c
Opening Stock of
finished good
Add:Production Cost
of goods completed b/d
Less : Closing Stock of
finished goods
Cost of good sold
Gross profit b/d
$
3890
Sales
$
100000
79345
83235
4000
79235
20765
100000
100000
Profit &Loss a/c
Administration Expenses $
Salaries
4400
Rent
200
Insurance
70
General expenses
1340
Selling & Distribution expenses
Salesmen’s salaries
3000
Commission on sales
1150
Carriage outwards
590
Net Profit
$
Gross profit b/d
$
20765
6010
4740
10015
20765
20765
Balance Sheet (extract)
Current Assets
Stock : Raw material
Finished good
Work-in-progress
$
6000
10000
4000
Manufacturing a/c for the year ended xx/xx/xx
$
Production cost of goods
completed
Manufacturing profit
X
X
_____
X
====
$
Market value of goods
completed c/d
Profit disposal of plant and
machinery
X
X
____
X
====
Trading a/c for the year ended xx/xx/xx
$
X
Opening stock of finished goods
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
X
Manufacturing Profit X
Solution:
CCC Ltd.
Manufacturing a/c for the year ended 31 December 2003
$
Stock of raw material 1.1.2003
Add: Purchase
Carriage inwards
Less: Stock of raw materials31.12.03
Cost of raw materials used (i)
4500
8800
390
9190
13690
5800
7890
Stock of case 1.1.2003
Add : Purchase
Less : Stock of cases 31.12.2003
Cost of wooden cases uses (ii)
Wages (2250*4/5)
Prime cost
(iii)
2250
2250
4500
1920
2580
18000
28470
Factory overhead expenses : (iv)
Indirect Wages (2250*1/5)
Manger ‘s salary
Power
Rates
Lighting (600*1/2)
Depreciation
Add: Work-in-progress
Less : Work in progress 31.12.2003
Production cost of goods completed c/d (v)
4500
1650
1820
910
300
20000
29180
57650
1250
58900
1900
57000
Trading &Profit and loss a/c for the year ended 31.12.2003
Sales (80*1000)
Less : Production cost of good sold b/d
Gross Profit
Less : Expenses:
Administration expenses
2400
Salesmen’s salaries
5950
Lighting (600*1/2)
300
Carriage outwards
210
Net Profit
80000
57000
23000
8860
14140
Tang Sau Lin (10)
Wong Wing Yin (14)