1. Slide 37.1 Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11 th Edition © Pearson Education Limited 2008 Divisions of costs

2. Slide 37.2 Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11 th Edition © Pearson Education Limited 2008 Direct and indirect costs The sum of all the direct costs is known as the prime cost. A cost that cannot be easily traced to the item being manufactured is known as an indirect cost.

3. Slide 37.3 Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11 th Edition © Pearson Education Limited 2008 Indirect manufacturing costs Examples are: Wages of cleaners Wages of crane drivers Rent of a factory Deprecation of plant and machinery Costs of operating forklift trucks Factory power Factory lighting.

4. Slide 37.4 Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11 th Edition © Pearson Education Limited 2008 Format of manufacturing account This is debited with the production cost of goods completed during the accounting period. It contains costs of: Direct materials Direct labour Direct expenses Indirect manufacturing costs.

5. Slide 37.5 Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11 th Edition © Pearson Education Limited 2008 Format of trading account This account includes: Production cost brought down from the manufacturing account Opening and closing inventory of finished goods Sales.

6. Slide 37.6 Wood and Sangster, Frank Wood's Business Accounting Volume 1 Power Points on the Web, 11 th Edition © Pearson Education Limited 2008 Format of profit and loss account This includes: Gross profit brought down from the trading account All administration expenses All selling and distribution expenses All financial charges.