MANUFACTURING account Lesson Note
Learning Objectives
This SS2 ACCOUNTING lesson note covers MANUFACTURING account for First Term, Week 4.
Lesson Note
Learning Objectives
At the end of the lesson, students should be able to:
Explain the meaning of a manufacturing account.
State the reasons for preparing a manufacturing account.
Identify and explain the terminologies used in a manufacturing account.
A. MEANING OF MANUFACTURING ACCOUNT
A manufacturing account is an account prepared by a manufacturing business to calculate the total cost of producing goods during a particular period.
B. REASONS FOR PREPARING A MANUFACTURING ACCOUNT
To calculate the total cost of production.
To determine the cost of raw materials used.
To calculate factory expenses.
To determine the cost of finished goods produced.
To help management control production costs.
C. TERMINOLOGIES USED IN MANUFACTURING ACCOUNT
Raw Materials: Materials used to produce finished goods.
Direct Labour: Wages paid to workers directly involved in production.
Direct Expenses: Expenses directly related to the production of goods.
Prime Cost: The total of direct materials, direct labour and direct expenses.
Factory Overheads: Indirect factory expenses, such as factory rent and electricity.
Work-in-Progress: Goods that are not yet completely produced.
Carriage Inwards: The cost of transporting raw materials to the factory.
Cost of Production: The total cost incurred in producing finished goods.
Indirect Materials: Materials used in production but not directly traceable to a particular product.
Depreciation: The reduction in the value of factory equipment due to use or age.
Evaluation
OBJECTIVE QUESTIONS
A manufacturing account is prepared to determine the ______. A. selling price only B. cost of production C. bank balance D. capital
Materials used in production are called ______. A. finished goods B. raw materials C. debtors D. creditors
Wages paid to workers directly involved in production are called ______. A. direct labour B. factory rent C. carriage outwards D. selling expenses
Prime cost consists of direct materials, direct labour and ______. A. indirect expenses B. direct expenses C. office rent D. advertising
Which of the following is a factory overhead? A. Office stationery B. Factory electricity C. Sales commission D. Carriage outwards
Goods that are not yet completely produced are called ______. A. finished goods B. raw materials C. work-in-progress D. debtors
The cost of transporting raw materials to the factory is called ______. A. carriage inwards B. carriage outwards C. sales expenses D. discount allowed
Which of the following is an indirect material? A. Main fabric used to sew a dress B. Wood used to make a table C. Lubricating oil for factory machines D. Flour used to bake bread
Depreciation is the reduction in the value of ______. A. factory equipment B. sales revenue C. raw materials purchased D. capital introduced
One reason for preparing a manufacturing account is to ______. A. calculate production costs B. calculate personal income tax only C. record customers’ addresses D. prepare staff attendance records
Theory Questions
1a. What is a manufacturing account?
1b. State three reasons for preparing a manufacturing account.
2a. Define raw materials.
2b. What is prime cost?
2c. Explain work-in-progress.