2. Supplies of raw materials Manufacturing a/c  calculate the production cost A Manufacturing firm (make the product) Customers

3. Manufacturing a/c $ Stock of raw materials as at 1.1.2002 2000 Add : Purchase12000 14000 Less: Stock of raw materials as at 31.12.2003 6000 Cost of raw materials consumed 8000

4. Manufacturing a/c for the year ended 31 Dec 2002 $ Cost of raw materials consumed 8000 Direct wages 2000 Prime Cost 10000 Factory overhead expenses 6000 Total cost of production 16000 Add: Work-in-progress as at 1.1.02 3000 19000 Less: Work-in-progress as at 31.12.02 4000 Production Cost of good completed c/d 15000

5. Production Cost of good completed Prime Cost (Direct Cost) Factory overhead expenses (Indirect cost) That can be traced back to the items being manufacturing Eg. Indirect Wages, Lighting, Rent, Depreciation Eg. Wage, Royalties

6. Work-in-progress Store Room Work-in-progress Production line Store Room Work-in-progress 1.1.2002 31.12.2002 Have not include in prime cost and factory overhead expense Have included these goods at year start but not those at year end

7. Trading a/c Opening Stock of $ $ finished good 3890 Sales 100000 Add:Production Cost of goods completed b/d 79345 83235 Less : Closing Stock of finished goods 4000 Cost of good sold 79235 Gross profit b/d 20765 100000 100000

8. Profit &Loss a/c Administration Expenses $ $ Salaries 4400 Rent 200 Insurance 70 General expenses 1340 6010 Selling & Distribution expenses Salesmen’s salaries 3000 Commission on sales 1150 Carriage outwards 590 4740 Net Profit 10015 20765 $ Gross profit b/d 20765 20765

9. Balance Sheet (extract) Current Assets $ Stock : Raw material 6000 Finished good 10000 Work-in-progress 4000

11. Manufacturing a/c for the year ended xx/xx/xx $ Production cost of goods completed X Manufacturing profit X _____ X ==== $ Market value of goods completed c/d X Profit disposal of plant and machinery X ____ X ====

12. Trading a/c for the year ended xx/xx/xx $ Opening stock of finished goods X Add: Market value of goods completed b/d X Purchases of finished goods X X Less: Closing stock of finished goods X Costs of goods sold X Gross Profit c/d X X === Stock loss raw materials X $ Sale X ____ X ==== Gross Profit b/d X Manufacturing Profit X

14. Solution: CCC Ltd. Manufacturing a/c for the year ended 31 December 2003 $ Stock of raw material 1.1.2003 4500 Add: Purchase 8800 Carriage inwards 390 9190 13690 Less: Stock of raw materials31.12.03 5800 Cost of raw materials used (i) 7890

15. Stock of case 1.1.2003 2250 Add : Purchase 2250 4500 Less : Stock of cases 31.12.2003 1920 Cost of wooden cases uses (ii) 2580 Wages (2250*4/5) 18000 Prime cost (iii) 28470

16. Factory overhead expenses : (iv) Indirect Wages (2250*1/5) 4500 Manger ‘s salary 1650 Power 1820 Rates 910 Lighting (600*1/2) 300 Depreciation 20000 29180 57650 Add: Work-in-progress 1250 58900 Less : Work in progress 31.12.2003 1900 Production cost of goods completed c/d (v) 57000

17. Sales (80*1000) 80000 Less : Production cost of good sold b/d 57000 Gross Profit 23000 Less : Expenses: Administration expenses 2400 Salesmen’s salaries 5950 Lighting (600*1/2) 300 Carriage outwards 210 8860 Net Profit 14140 Trading &Profit and loss a/c for the year ended 31.12.2003

18. Tang Sau Lin (10) Wong Wing Yin (14)