The document discusses preparing manufacturing accounts to calculate the unit cost of items produced. It provides: 1) A manufacturing account calculates the cost of producing completed goods by tracking raw material costs, direct wages, factory overheads and work-in-progress. 2) Key areas of the manufacturing process like raw material consumption, prime costs, factory overheads and cost of goods manufactured are calculated. 3) The complete manufacturing account format should show these key areas and the unit cost of production is calculated by dividing total cost of goods manufactured by the number of units sold.

1. Prepare manufacturing
accounts
Section 10
Objectives 2 & 3

2. Prepare manufacturing account
• Preparation of manufacturing accounts
• Calculate unit cost of items produced

3. Prepare manufacturing account
• A manufacturing account is prepared to
calculate the cost of producing completed
goods.
• After the preparation of the manufacturing
account, a calculation can be done to calculate
the unit cost of items produced

4. Prepare manufacturing
account
• Calculation of the key areas of
the manufacturing process is
done in an account
• Costs incurred are essential in a
manufacturing company to
determine profit
• Therefore rather than looking for
the total cost of production alone,
the cost of the keys areas are
also important

5. $
Purchases of raw materials Xxx
Carriage inwards of raw materials Xxx
Less purchases returns of raw materials (Xxx)
Net purchases Xxx
Format used to calculate the key areas:
Net purchases

6. Opening stock of raw materials $xxx
Net purchases xxx
Raw materials available for use xxx
Less closing stock of raw materials ( xxx)
Cost of raw materials used xxx
Format used to calculate the Key areas:
Cost of raw material consumed

7. $
Cost of raw materials used Xxx
Direct wages Xxx
Direct expenses Xxx
Prime cost XXX
Format used to calculate the Key areas:
Prime cost

8. Format used to calculate the Key areas:
Cost of goods manufactured
Prime cost xxx
Factory overheads:
(list them down) Xxx
Total factory overhead Xxx
Add work in progress or
process (opening)
xxx
Less work in progress or
process (closing)
Cost of Goods
manufactured (cost of
production)
(Xxx)
Xxx

9. Prepare a complete
manufacturing account
(a) Format of a complete
manufacturing account showing
clearly:
• Raw materials
• Prime cost
• Factory overheads
• Total manufacturing cost
• Cost of production (also known
as cost of goods manufactured)
(b) Format to calculate the unit cost
of production

11. Prepare manufacturing account
• Formula: calculation of cost per unit of items
produced
Cost of goods manufactured ÷ number of
units sold

13. Prepare manufacturing account
Show the name of the company, the period and
the name of the company as part of your
heading.
The total of all the manufacturing cost is
labelled cost of production or cost of goods
manufactured.
Insert the opening and closing work in progress
(process) at the end before calculating cost of
production.

14. Prepare manufacturing account
It is important to show the following sections in
the manufacturing account:
– The cost of raw materials consumed
– Prime cost
– Factory overhead
– Cost of production

15. Prepare manufacturing account
Watch the video on preparation of cost of goods
manufactured statement
Cost of Goods Manufactured Schedule
Carolyn Christesen
https://www.youtube.com/watch?v=4Oit9o2q-WU