elements of cost
TRANSCRIPT
Manufacturing account –
Elements of cost
Section 10Objective 1
Do you know how
snickers is made?
Let’s Look at
the following video…
https://www.youtube.com/watch?v=ZXAWU7hiseQ&list=PL0vRmiTj6a6NV2rCe1_tJaW8uT_bqPDb4&index=2
https://www.youtube.com/watch?v=ZXAWU7hiseQ&list=PL0vRmiTj6a6NV2rCe1_tJaW8uT_bqPDb4&index=2
Manufacturers of snickers sell approximately US $ 2,000,000,000 bars of snickers a year.
It is important to calculate how much is actually spent on making a snicker bar…
To do this a manufacturing account must be prepared.
The aim of preparing the manufacturing account is to calculate the production cost
https://www.youtube.com/watch?v=ZXAWU7hiseQ&list=PL0vRmiTj6a6NV2rCe1_tJaW8uT_bqPDb4&index=2
The costs needed to calculate cost of production:• Raw materials
• Labour• Operating the factory/ production area
Cost of making the product
https://www.youtube.com/watch?v=ZXAWU7hiseQ&list=PL0vRmiTj6a6NV2rCe1_tJaW8uT_bqPDb4&index=2
Based on the video, can you identify the raw
materials used in making the snicker bar?
Cost of making the product
Raw material falls under the categoryDirect Cost
https://www.youtube.com/watch?v=ZXAWU7hiseQ&list=PL0vRmiTj6a6NV2rCe1_tJaW8uT_bqPDb4&index=2
Direct and Indirect costs
Direct Cost
the cost incurred in manufacturing of specific units:• Direct materials• Direct wages• Direct expenses
Indirect Cost
the other costs incurred linked to the manufacturing process but not specifically identified with the manufacture of specific units:• Indirect materials• Indirect wages• Indirect expenses
https://www.youtube.com/watch?v=ZXAWU7hiseQ&list=PL0vRmiTj6a6NV2rCe1_tJaW8uT_bqPDb4&index=2
Direct and Indirect costs
Do you think that you can figure out the direct and indirect cost that would be incurred in the production of snickers?