Statement of Manufacturing costs

Format of manufacturing account

ECO COMPANY

Manufacturing statement for the year ended 31^st December XXXX

Stock of raw materials at start		xxxx
Add: Purchases of raw materials	xxxx
Add: Carriage inward of raw materials	xxxx	xxxx
Less: Returns outwards of raw materials		xxxx
		xxxx
Less: Stock of raw material		xxxx
Cost of raw materials consumed		xxxx
Add: Direct wages		xxxx
Add: Direct expenses		xxxx
Prime cost		xxxx
Factory overhead expenses
Fuel and power	xxxx
Wages	xxxx
Rent	xxxx
Depreciation of plant	xxxx
Factory cost	xxxx
Add Work in progress	xxxx	xxxx
		xxxx
Less: Work in progress at close		xxxx
Production cost of goods (Manufacturing cost)		xxxx

Example

The following is a trial balance of Mr. Mashamba for the year ended 31^st December 2018:

Mr Mashamba's Trial Balance as at 31^st December 2018

	DR	CR
Inventory of raw materials 1/1/2018	420,000
Inventory of finished goods 1/1/2018	778,000
Inventory of work in progress 1/1/2018	270,000
Wages (Direct TZS 3,600,000, factory indirect TZS 2,900,000)	6,500,000
Royalties	140,000
Carriage inwards on raw materials	70,000
Purchase of raw materials	7,400,000
Machinery and Plant (cost 5,600,000)	4,600,000
Office Fixtures (Cost TZS 400,000)	240,000
Other factory expenses	620,000
Lighting and heating	150,000
Factory power and fuel	274,000
Salaries	880,000
Sales expenses	600,000
Commission on sales	230,000
Rent	240,000
Insurance	84,000
General administration expenses	268,000
Office Rates	46,000
Discount allowed	96,000
Carriage outwards	118,000
Sales		20,000,000
Account receivable & Account payable	2,846,000	1,280,000
Cash at Bank	336,000
Cash in hand	30,000
Drawings	1,200,000	7,156,000
Capital as at 1/1/2018	28,436,000	28,436,000

Notes at 31/12/2018

1. Inventory of raw materials TZS 480,000, inventory of finished goods TZS 800,000 and inventory of work in progress TZS 300,000.
2. Lighting, rent and insurance are to be apportioned as follows: Factory 5/6, administration 1/6.
3. Depreciation on machinery and plant and office fixtures is 10% per annum on cost.
4. Net Profit was TZS 1,796,000.

Use the given information to prepare the statement of Manufacturing Cost for the year ending 31^st December 2018 and the Statement of Financial Position as at 31^st December 2018.

Solution

Mashamba Manufacturing Cost Statement for the year ended 31^st Dec 2018

Raw materials
Opening inventory	420,000
Purchases	7,400,000
Carriage in	70,000
	7,890,000
Less: Closing inventory	480,000	7,410,000
Cost of raw materials
Royalties	140,000
Power and fuel	274,000
Direct wages	3,600,000	4,014,000
Prime cost		11,424,000
Factory overheads
Other factory expenses	620,000
Lighting and heating	125,000
Rent	200,000
Wages	2,900,000
Insurance	70,000	3,915,000
		15,339,000
Add: Opening work in progress		270,000
		15,609,000
Less: Closing work in progress		300,000
Manufacturing cost		15,309,000

Mashamba Statement of Profit and Loss for the year ending 31 December 2018

Sales		20,000,000
Less: Cost of sales
Opening inventory	778,000
Cost of goods manufactured	15,309,000
	16,087,000
Less: Closing inventory	800,000	15,287,000
Gross profit		4,713,000
Less: Expenses
Discount allowed	96,000
Salaries	880,000
Sales expenses	600,000
Commission	230,000
General expenses	268,000
Rent	40,000
Office rates	46,000
Carriage out	118,000
Lighting and heating	25,000
Insurance	14,000
Depreciation: Plant	560,000
Fixture	40,000
Net profit		1,796,000

Mashamba Statement of Financial Position as at 31^st Dec 2018

Non-current assets
Machinery and plant	4,600,000
Less: Depreciation	560,000	4,040,000
Office fixtures	240,000
Less: Depreciation	40,000	200,000
Fixed assets		4,240,000
Current assets
Stock	1,580,000
Debtors	2,846,000
Bank	336,000
Cash	30,000	4,792,000
		9,032,000
Capital	7,156,000
Add: Net profit	1,796,000
	8,952,000
Less: Drawings	1,200,000	7,752,000
Current liabilities
Creditors		1,280,000
		9,032,000