Accounting·Other accounting statements · NSSCO 1.1
Calculating production costs
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A factory doesn't buy its goods ready-made — it MAKES them, so it must work out what they cost to produce. In this lesson we build the Manufacturing section step by step: the cost of raw materials consumed, direct versus indirect costs, prime cost, factory overheads, work in progress, the full production cost of the finished goods, and finally the cost of a single unit — all in clean N$ worked statements.
What you'll learn in this lesson
By the end you should be able to (NSSCO Accounting 1.1):
- Explain the purpose of preparing a Manufacturing section in the Income Statement
- Calculate cost of raw materials consumed
- Explain direct and indirect costs with examples
- Explain the term prime cost and calculate prime cost of production
- Explain the term factory overheads with examples
- Explain the term work in progress
- Calculate production cost of finished goods
- Calculate the unit cost of production
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Ms Pieters and Mike talk through the whole topic — with the figure and working drawn live.