PRODUCTION COST STATEMENT
ACCOUNTING
CO-ORDINATOR: P Gopaul
Siphesihle Secondary
PRODUCTION COST STATEMENTS
LO2:
AS 2:
MANAGERIAL ACCOUNTING
Prepare , present, analyse and report on cost information for a manufacturing Enterprise by compiling a production cost statement. 1. The financial statements of manufacturing enterprises The financial statements of the manufacturing enterprise differs very little from those of the merchandising enterprise. Account titles on the balance sheet of the manufacturer are similar to those used by the merchandiser.
The main difference between the balance sheets is the use of three inventory (stock) accounts by the manufacturing enterprise while merchandising enterprise use only one.
Even the income s t a t e m e n t s a r e s i m i l a r.
H o w e ve r, t h e manufacturer 's key focus is on the cost of goods manufactured instead of the purchases account.
In addition, the merchandise inventory is replaced by the finished goods inventory account.
All manufacturing cost incurred are generally considered to be part of production costs.
Hundreds of transactions occur during an accounting period and each transaction affects part of the cost flow process. At the end of the financial year the flow of all manufacturing costs is summarized in the production cost statement. The cost of goods manufactured should be the same as the amount transferred from the work-in progress stock account to the finished goods stock account.
? The stocks of raw materials are included as prime cost as they affect the amount of raw materials used. Opening stock is added to purchases of raw materials and closing stock is deducted to arrive at the cost of raw materials used. In addition, direct labour forms a part of prime cost.
? The total cost of production that emerges from adding prime costs to factory overheads is the cost of producing everything, including goods that have not yet been finished and are in a partly completed state. Since these goods are not ready to be sold yet, they
CO-ORDINATOR: P Gopaul
Siphesihle Secondary
PRODUCTION COST STATEMENTS
LO2:
AS 2:
MANAGERIAL ACCOUNTING
Prepare , present, analyse and report on cost information for a manufacturing Enterprise by compiling a production cost statement. 1. The financial statements of manufacturing enterprises The financial statements of the manufacturing enterprise differs very little from those of the merchandising enterprise. Account titles on the balance sheet of the manufacturer are similar to those used by the merchandiser.
The main difference between the balance sheets is the use of three inventory (stock) accounts by the manufacturing enterprise while merchandising enterprise use only one.
Even the income s t a t e m e n t s a r e s i m i l a r.
H o w e ve r, t h e manufacturer 's key focus is on the cost of goods manufactured instead of the purchases account.
In addition, the merchandise inventory is replaced by the finished goods inventory account.
All manufacturing cost incurred are generally considered to be part of production costs.
Hundreds of transactions occur during an accounting period and each transaction affects part of the cost flow process. At the end of the financial year the flow of all manufacturing costs is summarized in the production cost statement. The cost of goods manufactured should be the same as the amount transferred from the work-in progress stock account to the finished goods stock account.
? The stocks of raw materials are included as prime cost as they affect the amount of raw materials used. Opening stock is added to purchases of raw materials and closing stock is deducted to arrive at the cost of raw materials used. In addition, direct labour forms a part of prime cost.
? The total cost of production that emerges from adding prime costs to factory overheads is the cost of producing everything, including goods that have not yet been finished and are in a partly completed state. Since these goods are not ready to be sold yet, they