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The manufacturing account
Key calculations
2.1 Prime cost
Prime cost is the total of all direct costs. They include direct materials consumed,
plus direct labour and direct expenses. It should be clearly shown as a sub-total on
the manufacturing account.
2.2 Factory cost of production
Factory cost of production is the total of prime cost and indirect costs consumed in
the factory. Factory costs of production will be shown as a sub-total in the
manufacturing account.
2.3 Factory cost of goods completed
This is the end result of the manufacturing account, and its balance is incorporated
into the trading account. In effect this is equivalent to purchases included in the
trading account to calculate gross profit for a trading business.
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