Manufacturing accounts Quiz

B. Raw materials Direct costs are directly attributable to the production of goods. Raw materials are a direct cost because they are used in the production process.

A. Direct materials + Direct labour Prime cost is the sum of direct materials and direct labour costs.

C. Added to both the opening and closing inventory Work in progress should be included in both the opening and closing inventory to accurately reflect the cost of goods in production.

A. Prime cost + Factory overheads The factory cost of production is the sum of prime cost and factory overheads.

D. All of the above All these adjustments should be made to the financial statements of a sole trader to ensure accuracy.

A. Opening inventory + Purchases - Closing inventory The cost of goods sold is calculated by adding opening inventory and purchases, then subtracting closing inventory.

C. Factory utilities Indirect costs are not directly attributable to the production of specific goods. Factory utilities are an indirect cost because they support the production process but cannot be traced to individual products.

A. Revenue - Cost of goods sold Gross profit is calculated by subtracting the cost of goods sold from revenue.

A. As a credit in the manufacturing account and a debit in the trading account The cost of goods manufactured is transferred to the trading account as a credit in the manufacturing account and a debit in the trading account.

C. Factory insurance Factory overheads are indirect costs associated with the production process. Factory insurance is an example of a factory overhead because it supports the production process but cannot be traced to individual products.

A. Gross profit - Operating expenses Net profit is calculated by subtracting operating expenses from gross profit.

A. Opening inventory + Purchases If there is no closing inventory, the cost of goods sold is calculated by adding opening inventory and purchases.

B. Wages of production workers Direct labour costs are the wages paid to workers directly involved in the production process. The wages of production workers are a direct labour cost because they are directly attributable to the production of goods.

A. Total manufacturing costs + Opening work in progress - Closing work in progress The cost of goods manufactured is calculated by adding total manufacturing costs and opening work in progress, then subtracting closing work in progress.

A. As a credit in the trading account and a debit in the profit and loss account The cost of goods sold is transferred to the profit and loss account as a credit in the trading account and a debit in the profit and loss account.