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Manufacturing Accounts
Topic: Distinguish between direct and indirect costs (AT-01)
1) Which is a direct cost?
(A) depreciation of machinery
(B) lighting and heating
(C) raw materials used
(D) supervisor’s wages
May 2011 Q27
2) Which is a direct cost to a manufacturer?
(A) factory cleaner’s wages
(B) factory supervisor’s salary
(C) machine operator’s wages
(D) salesman’s commission
Nov 2013/11 Q27
3) Which is an indirect cost?
(A) carriage inward (B) factory rent
(C) production materials (D) production wages
May 2005 Q37
4) A company makes furniture
What will be treated as a direct cost in the company’s manufacturing account?
(A) depreciation of vehicles that deliver the furniture
(B) insurance of the machinery used to make the furniture
(C) transport costs of bringing in the raw materials to make the furniture
(D) wages of workers maintaining the factory machinery
may 2000 Q36
5) Which type of labour would be classified as direct?
1 factory managers
2 factory office staff
3 factory production workers
(A) 1, 2 and 3
(B) 1 and 3 only
(C) 2 only
(D) 3 only
May 2018/12 Q26

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Topic: understand direct material, direct labour, prime cost and factory overheads (AT-
02)
1) Which is a factory overhead?
(A) carriage on raw materials
(B) cost of raw materials
(C) production supervisor’s wages
(D) wages of machine operators
May 2008 Q26
2) Leroy makes one product. He provides the following information.
$
Material cost 5 000
Labour cost 4 000
Factory overheads 2 000
What is the prime cost?
(A) $5 000 (B) $7 000
(C) $9 000 (D) $11 000
May 2004 Q37
3) A manufacturing business provides the following details.
$
Office expenses 14 000
Direct expenses 22 000
Direct labour 18 000
Direct materials 24 000
Factory lighting 2 000
Financial charges 5 000
Total 85 000
What is the prime cost of production?
(A) $64 000 (B) $66 000
(C) $80 000 (D) $85 000
Nov 2004 Q37
4) A Manufacturing Account includes the following:
$
raw materials

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opening inventory 300

purchases 9100
closing inventory 500
What is the cost of raw materials?
(A) $8 300 (B) $8 900
(C) $9 100 (D) $9 300
Nov 2006 Q38
5) A manufacturer provides the following information.
$
factory wages 11 000
carriage on raw materials 2 700
machine repairs 3 420
supervisor’s wages 6 000
raw materials used 19 700
What is the prime cost of manufacturing?
(A) $33 400 (B) $36 700 (C) $39 400 (D) $42 820
May 2007 Q37
6) A manufacturing business provided the following information about its first year of trading.
$
Purchases of raw materials 128 000
Closing inventory of raw materials 13 000
Purchases of finished goods 65 000
Closing inventory of finished goods 29 000
Factory direct wages 77 000
Supervisor’s salary 21 000
Depreciation of machinery 19 000

What was the prime cost?

(A) $38 000
(B) $74 000
(C) $152 000
(D) $192 000
0452/ Nov 2015/13 Q1 j
7) The financial year of Msamati Manufacturing ends on 31 January.

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The following is the summarised manufacturing account for the year ended 31 January 2017.
$
Prime cost 505 650
Factory overheads 176 390
682 040
Change in work in progress (12 090)
Cost of production 669 950
REQUIRED
(a) Explain the meaning of the term ‘prime cost’.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]
(b) (i) Explain the meaning of the term ‘factory overheads’.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
.......................................................................................................................................[2]
(ii) Suggest two items which may be included in the factory overheads.
1 ........................................................................................................................................
2 ....................................................................................................................................[2]
(c) (i) State the meaning of the term ‘work in progress’.
...........................................................................................................................................
.......................................................................................................................................[1]
(ii) State whether the closing work in progress was greater or smaller than the opening work in
progress.
…...................................................... [1]
8) TP Limited manufactures toys.
REQUIRED
(a) Complete the table by inserting a tick (ü) to show how each type of manufacturing cost
should be classified. The first one has been completed as an example.
Direct material Direct labour Factory Overhead
Purchase of plastic toy parts
Rent of factory

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Wages of machine operator

Purchase of packaging
Wages of supervisor
[4]
(b) State how prime cost is calculated.
...................................................................................................................................................
.............................................................................................................................................. [2]
9) Complete the sentences below, using the terms
current assets direct labour finished goods
inventory raw materials work in progress
A manufacturing business is one which purchases.............................................and by
using.............................................converts them into.............................................. If some units
of production are only partially complete they are known as............................................. These
appear as.............................................under the .............................................heading in the
statement of financial position. [6]

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Topic: understands and make adjustments for work in progress (AT-03)

1) A manufacturing business provided the following information.
$
prime cost 30 500
factory overheads 17 200
cost of goods produced 46 000
office and selling expenses 9 500
opening work-in-progress 5 100

What was the value of the closing work-in-progress?

(A) $1700 (B) $3400 (C) $6800 (D) $16 300
May 2018/12 Q27
2) The work in progress of a manufacturing business increased during the year.
Which effect does this have?
on cost of production on gross profit
(A) decrease increase
(B) decrease no effect
(C) increase decrease
(D) increase no effect

0452/ May 2017/11 Q1 h

3) Why is it necessary for a manufacturing business to make an adjustment for work in
progress in its manufacturing account?

1 to calculate what is needed to complete production

2 to record all factory costs
3 to show only the cost of goods completed
(A) 1 and 2
(B) 1 only
(C) 2 and 3
(D) 3 only
0452/ Feb 2018/12 Q1 c
4) How does a manufacturing business calculate the production cost of completed goods?
(A) prime cost + factory overheads + opening work in progress – closing work in progress

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(B) prime cost + factory overheads – opening work in progress + closing work in progress
(C) prime cost – factory overheads + opening work in progress – closing work in progress
(D) prime cost – factory overheads – opening work in progress + closing work in progress
0452/ May 2018/12 Q1 d

5) Name three types of inventory which might be held by a manufacturing business.

1..............................................................................................................................................

2..............................................................................................................................................

3.............................................................................................................................................. [3]

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Topic: calculate factory cost of production (AT-04)

1) How is the factory cost of production calculated?
(A) direct material + direct labour
(B) direct material + direct labour + direct expenses
(C) direct material + direct labour + direct expenses + factory overheads
(D) direct material + direct labour + direct expenses + total overheads
May 2010 Q26
2) How is the factory cost of production calculated?
(A) directlabour + direct material
(B) directlabour + factory overheads
(C) direct material + direct labour + factory overheads
(D) direct material + direct labour + total overheads
Nov 2001 Q37/May 2006 Q36
3) How is cost of production calculated?
(A) prime cost less factory overheads
(B) prime cost plus factory overheads
(C) prime cost less factory overheads less increase in inventory of work in progress
(D) prime cost plus factory overheads plus increase in inventory of work in progress
Nov 2003 Q37/ Nov 2009 Q25
4) A manufacturing firm’s costs were as follows.
$
Raw materials 55 000
Direct labour 86 400
Factory overheads 122 000
Depreciation of plant 6 400
Administration costs 8 800
Selling and distribution 12 000
There was closing work-in-progress of $12 400.
What was the factory cost of production?
(A) $257 400 (B) $263 400
(C) $269 800 (D) $278 200
May 2002 Q37

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5) A manufacturer has the following costs.

$
Raw material 8 000
Wages : factory workers 4 000
Factory supervisor 1 000
office works 2 000
Fixed overheads : factory 4 500
Office 1 500
What the factory cost of production?
(A) $12 000 (B) $16 500
(C) $17 500 (D) $21 000
Nov 2002 Q38/May 2009 Q28
6) A manufacturer provides the following information for May.
$
Direct material 4 000
Direct labour 2 000
Factory overheads 500
Work in progress 1 May 100
31 May 150
What is the factory cost of production?
(A) $6 050 (B) $6 450
(C) $6 500 (D) $6 550
May 2003 Q38
7) Addae opened a factory making children’s clothes on 1 February 2017.
He provided the following information at the end of his first year of trading.
$
Purchases of raw materials 48 400
Direct factory wages 38 800
Indirect factory wages 27 140
General factory expenses 3 150
Carriage inwards 1 950
Factory heat and light 1 110
Factory insurance 1 860
Inventory at 31 January 2018:

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raw materials 5 150

work in progress 7 260
finished goods 5 500

Factory machinery, $75 000, was purchased on 1 February 2017 and is to be depreciated by
20% per annum.
REQUIRED
(a) Define and give one example of each of the following types of inventory in Addae’s business.
(i) Raw materials
Definition ............................................................................................................................
...........................................................................................................................................
Example .........................................................................................................................[2]
(ii) Work in progress
Definition ............................................................................................................................
...........................................................................................................................................
Example .........................................................................................................................[2]
(iii) Finished goods
Definition ............................................................................................................................
...........................................................................................................................................
Example .........................................................................................................................[2]

(b) Prepare the manufacturing account for the year ended 31 January 2018.
Addae
Manufacturing Account for the year ended 31 January 2018

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Topic: prepare manufacturing accounts, income statements and statement of financial

position (AT-05)
1) What is the main reason for preparing a manufacturing account?
(A) to calculate the cost of overheads
(B) to calculate the cost of production
(C) to calculate the cost of raw materials used
(D) to calculate the prime cost
Specimen 2000 Q34
2) Which items may appear in the income statement (trading account section) of a
manufacturing business?
(A) cost of production and inventories of finished goods only
(B) cost of production and inventories of work in progress and finished goods
(C) purchases of raw materials and inventories of finished goods only
(D) purchases of raw materials and inventories of raw materials only
0452/ Feb 2016/11 Q1 h
3) The financial year of Paul Bergen, who is a manufacturer, ends on 30 June. On 30 June he
had three inventories _ finished goods, raw material and work in progress.
Where will these inventories appear in Paul Bergen’s financial statements prepared on 30
June 2006?
Manufacturing trading section of income Statement of Financial
account statement Position
(A) finished goods work in progress finished goods
raw material raw material
(B) finished goods work in progress finished goods
raw material raw material
work in progress
(C) raw material finished goods finished goods
work in progress work in progress
(D) raw material finished goods finished goods
work in progress raw material
work in progress
Specimen 2008 Q24
4) What will be included in a manufacturing account?
(A) Bank charges and commission on sales

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(B) Depreciation of plant and salesmen’s salaries

(C) Direct labour and factory overheads
(D) Direct labour and office expenses
Nov 2005 Q37
5) What does prime cost in a Manufacturing Account include?
(A) carriage inwards
(B) carriage outwards
(C) factory power
(D) factory rent and rates
May 2002 Q36 / May 2003 Q37
6) A manufacturing business extracts the following information from its books:
Direct materials $14 000
Direct labour $11 000
Indirect expenses $ 4 000
What is the amount of prime cost?
(A) $18 000
(B) $21 000
(C) $25 000
(D) $29 000
Specimen 2000 Q35
7) A firm’s manufacturing costs are shown in the table
Raw materials $10 per unit
Direct wages $5 per unit
Total indirect factory expenses $20 000
20 000 units are manufactured during the year. What is the prime cost.
(A) $100 000 (B) $200 000
(C) $300 000 (D) $320 000
May 2000 Q37
8) In which section of a manufacturing account would a royalty payment appear?
(A) direct expenses
(B) direct labour
(C) direct materials
(D) factory overheads
May 2014/11 Q25

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9) At the end of financial year a manufacturer has inventories of finished goods, raw materials
and work in progress.
Which inventories will appear in the Manufacturing Account?
Finished goods Raw materials Work-in-progress
(A) √ √
(B) √ √
(C) √ √
(D) √ √ √
May 2001 Q37
10) Which costs are included in prime cost?
Direct materials direct labour Factory overheads change in work in
progress

(A)    . 
(B)    . ×
(C)   × ×
(D)  × × ×

May 2017/11 Q26

11) Wages are paid by a manufacturing business to machine operators, factory cleaners and
office staff.
Where are these wages recorded in the financial statements?
machine operators factory cleaners office staff
(A) overheads in income statement income statement
manufacturing account
(B) overheads in overheads in overheads in
manufacturing account manufacturing account manufacturing account
(C) prime cost in overheads in income statement
manufacturing account manufacturing account
(D) prime cost in prime cost in overheads in
manufacturing account manufacturing account
manufacturing account

Nov 2015/11 Q26

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12) Sumit and Theo have been in partnership for some years running a manufacturing business.
REQUIRED
(a) Complete the following table indicating with a tick (✓) where each item would appear in their
financial statements.
prime cost section of overheads section of Income
statement
the manufacturing the manufacturing
account account
Office rent 
factory supervisor’s salary
carriage on raw materials
purchase of finished goods
salesman’s commission
factory supervisor’s salary
carriage on raw materials
[5]
13) Harrington provided the following information.
$
At 1 January 2014 Inventory – raw materials 5 600
– work in progress 1 900
– finished goods 4 600

For the year ended

31 December 2014 Purchases of raw materials 71 100
Raw materials returned 1 000
Raw materials taken for own use 2 000
Carriage on raw materials 2 100
Carriage outwards 4 050
Direct labour 52 550
Depreciation of machinery 4 400
Depreciation of office equipment 3 200
Discount allowed 3 050
Discount received 1 010
Salesman’s salary 19 840
Administration costs 20 070

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Factory rent 20 000

Office rent 10 000
At 31 December 2014 Inventory – raw materials 4 200
– work in progress 1 800
– finished goods 5 500
REQUIRED
(a) Complete the following table. Indicate with a tick (√) which costs from this data appear in the
overheads section of the manufacturing account and which appear in the income statement.
One cost has been shown as an example.
Cost Overheads section of the Income statement
manufacturing account
Office rent 

[7]
14) The financial year of Msamati Manufacturing ends on 31 January.
The following is the summarised manufacturing account for the year ended 31 January 2017.
$
Prime cost 505 650
Factory overheads 176 390
682 040
Change in work in progress (12 090)
Cost of production 669 950

Msamati Manufacturing provided the following information for the year ended 31 January 2017.
$
Revenue 816 370
Purchases of finished goods 17 200
Commission received 2 700

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Administration expenses 38 160

Selling expenses 28 270
Inventory of finished goods 1 February 2016 56 120
Office equipment at cost 32 000
Delivery vehicles at cost 68 000
Provision for depreciation
Office equipment 14 400
Delivery vehicles 17 000
Loan from A1 Loans received 1 April 2016 15 000

At 31 January 2017
Inventory of finished goods 61 340
Commission receivable outstanding 130
Loan interest at 5% per annum is outstanding

During the year ended 31 January 2017 the owner of the business took finished goods costing
$1620 for his own use.

Depreciation is charged as follows:

Office equipment at 15% per annum using the straight line (equal instalment) method
Delivery vehicles at 25% per annum using the reducing (diminishing) balance method.
REQUIRED
(d) Prepare the income statement for the year ended 31 January 2017.

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Msamati Manufacturing
Income Statement for the year ended 31 January 2017

[10]
Complete the following table by writing True or False against each statement.
True or False
Work in progress may appear in Jake’s manufacturing account.
Prime cost appears in Jake’s income statement.
Jake’s business is a service business.
[3]

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Topic: make adjustments to financial statements (AT-06)

1) The policy of a manufacturing company is to state its profit fairly.
On which basis should its inventory of finished goods is valued in its accounts?
(A) prime cost, $20 000
(B) cost of production, $50 000
(C) cost of similar goods bought from another supplier, $55 000
(D) price at which goods were transferred from the factory to the warehouse, $60 000.
Specimen 2000 Q36
2) A manufacturing business provided the following information.
$
Opening inventory of finished goods 17 000
Closing inventory of finished goods 12 000
Cost of production for the year 100 000
Purchases of finished goods for the year 70 000

What was the cost of sales for the year?

(A) $75 000
(B) $105 000
(C) $170 000
(D) $175 000
0452/ May 2015/11 Q1 h
3) The rent of a manufacturing business is split 60% factory, 10% offices and 30% showrooms.
Business rent is $40 000 a year and salesmen’s salaries are $12 000 a year.
How much appears in the manufacturing account for these costs?
(A) $24 000
(B) $31 200
(C) $36 000
(D) $46 800
0452/ Nov 2015/11 Q1 i

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4)

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0452/ FM 2017/22 Q3

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