Lesson 5: Manufacturing Accounts

Lesson 5: Manufacturing Accounts

A manufacturing account is an account in which the costs of producing finished goods are calculated. It is prepared for internal use.
Direct factory costs are factory costs which change every time an extra unit is made. For example, direct factory wages are wages paid to production workers who are paid per unit made.
Production overheads or indirect factory costs are factory costs which do not change every time an extra unit is made. For example, indirect factory wages are wages paid to production managers who are paid the same each month regardless of how many units are made. Prime cost is raw material costs plus direct factory costs.

 

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