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Manufacturing Accounts

Manufacturing Accounts. Classification of Costs. Manufacturing Accounts. The following passage is: a brief introduction to manufacturing accounts and how manufacturing costs are classified. Classification of Costs (1). A manufacturing account is prepared to find out:

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Manufacturing Accounts

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  1. Manufacturing Accounts Classification of Costs

  2. Manufacturing Accounts • The following passage is: • a brief introduction to manufacturing accounts and • how manufacturing costs are classified.

  3. Classification of Costs (1) • A manufacturing account is prepared to find out: • the cost of goods manufactured. • Costs of manufacturing include: • all resources used, directly or indirectly, in the manufacture of goods. • The manufacturing costs can be classified into direct costs and indirect costs

  4. Classification of Costs (2) • Direct costs are those costs directly involved in the manufacture of goods. • Examples of direct costs are: • direct materials • direct labour and • direct expenses. • All the direct costs are collectively known as prime cost.

  5. Classification of Costs (3) • Indirect costs are not directly related to production. • They are all the remaining production expenses. • Examples of indirect costs include • factory rent, factory power, depreciation of plant and machinery, etc. • Indirect costs are also known as factory overheads.

  6. A manufacturing account is prepared to find out the cost of goods manufactured. Costs of manufacturing include all resources used, directly or indirectly, in the manufacture of goods. The manufacturing costs can be classified into direct costs and indirect costs. Direct costs are those costs directly involved in the manufacture of goods. Examples of direct costs are direct materials, direct labour and direct expenses. All the direct costs are collectively known as prime cost. Indirect costs are not directly related to production. They are all the remaining production expenses. Examples of indirect costs include factory rent, factory power, depreciation of plant and machinery, etc. Indirect costs are also known as factory overheads. (You can refer to your text-book )

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