Elements of cost

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




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




The costs needed to calculate cost of production:• Raw materials

• Labour• Operating the factory/ production area

Cost of making the product




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




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




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?



Elements of cost

Education

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