PRODUCTION COST STATEMENT

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ACCOUNTING CO-ORDINATOR: P Gopaul Siphesihle Secondary PRODUCTION COST STATEMENTS LO2: AS 2: MANAGERIAL ACCOUNTING Prepare , present, analyse and report on cost information for a manufacturing Enterprise by compiling a production cost statement. 1. The financial statements of manufacturing enterprises The financial statements of the manufacturing enterprise differs very little from those of the merchandising enterprise. Account titles on the balance sheet of the manufacturer are similar to those used by the merchandiser. The main difference between the balance sheets is the use of three inventory (stock) accounts by the manufacturing enterprise while merchandising enterprise use only one. Even the income s t a t e m e n t s a r e s i m…show more content…
The changing face of production costs Insurance [56 000-(6 000 x 6/12 x 3/5] Technology and the new manufacturing processes of the 1990s and 2000s have produced Rent expense [150 000- 30 000*] entirely new patterns of production costs. The three elements of production cost are still Electricity materials. labour and factory overhead. However, the percentage of each element in the Consumable stores [3 250 + 6 000-1 000-250] total cost of a product has changed. Depreciation [16 000 + 1 500] During the 1950s, 1960s, and 1960s and 1970s labour was the dominant cost element Total cost of production making up over 40% of total production cost. Direct material contributed 35% and factory Work in progress (1 Mar. 20.7) overheard around 25% of total cost. 75% of total cost of production was a direct cost, traceable to Cost of work -in-progress during the year the product. Improved production technology caused a dramatic shift in the relative Work in progress (28 Feb 20.8.) contribution of the three production cost Cost of production of finished goods elements. People were replaced by machines and direct labour was reduced significantly. * Rent expense prepaid: Today, only 50% of production cost is directly 150 000 traceable to the product; the other 50% is factory = 15 months overhead, an indirect cost. 3. Preparing production cost statements = 10 000 per month x 3 months (Activity) Calculations The financial year for Java Manufacturing Workings = R30 000 Enterprises ends 28
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