Direct and Indirect cost in manufacturing accounts

1. Manufacturing account –
Elements of cost
Section 10
Objective 1

2. Do you
know how
snickers is
made?
Let’s Look
at the
following
video…
https://www.youtube.com/watch?v=ZXAWU7hiseQ&list=PL0vRmiTj6a6NV2rCe1_tJaW8
uT_bqPDb4&index=2

3. https://www.youtube.com/watch?v=ZXAWU7hiseQ&list=PL0vRmiTj6a6NV2rCe1_tJaW8
uT_bqPDb4&index=2
Manufacturers of snickers sell approximately
US $ 2,000,000,000 bars of snickers a year.
It is important to calculate how much is actually spent on making a snicker bar…
To do this a manufacturing account must be prepared.
The aim of preparing the manufacturing account is to calculate the production
cost

4. https://www.youtube.com/watch?v=ZXAWU7hiseQ&list=PL0vRmiTj6a6NV2rCe1_tJaW8
uT_bqPDb4&index=2
The costs needed to calculate cost of production:
• Raw materials
• Labour
• Operating the factory/ production area
Cost of making the product

5. https://www.youtube.com/watch?v=ZXAWU7hiseQ&list=PL0vRmiTj6a6NV2rCe1_tJaW8
uT_bqPDb4&index=2
Based on the video, can you
identify the raw materials used
in making the snicker bar?
Cost of making the product
Raw material falls under the
category
Direct Cost

6. https://www.youtube.com/watch?v=ZXAWU7hiseQ&list=PL0vRmiTj6a6NV2rCe1_tJaW8
uT_bqPDb4&index=2
Direct and Indirect costs
Direct Cost
the cost incurred in manufacturing
of specific units:
• Direct materials
• Direct wages
• Direct expenses
Indirect Cost
the other costs incurred
linked to the manufacturing
process but not specifically
identified with the
manufacture of specific
units:
• Indirect materials
• Indirect wages
• Indirect expenses

7. https://www.youtube.com/watch?v=ZXAWU7hiseQ&list=PL0vRmiTj6a6NV2rCe1_tJaW8
uT_bqPDb4&index=2
Direct and Indirect costs
Do you think that you can figure out the direct and
indirect cost that would be incurred in the production
of snickers?