These questions cover sorting factory costs, prime cost, factory overheads, work in progress, the transfer to cost of sales and shared costs. They run from easy to harder. All businesses and figures are fictional, and amounts are in RM.
Work on paper first and write out each layout in full. Open each answer only after your own attempt. The lessons are in manufacturing accounts.
Questions
1. (Easy) A bicycle maker incurs these costs: (a) steel tubes, (b) wages of welders who build the frames, (c) wages of the factory manager, (d) depreciation of welding machines, (e) salary of showroom staff, (f) oil for the machines. Classify each as direct material, direct labour, factory overhead or not a production cost.
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(a) Direct material. (b) Direct labour. (c) Factory overhead (indirect wages). (d) Factory overhead. (e) Not a production cost, a selling expense. (f) Factory overhead (indirect material).
2. (Easy) Factory wages for the year are RM 20,000. Of this, RM 15,000 was paid to workers who make the goods and the rest to supervisors. Find the direct wages and the indirect wages.
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Direct wages: RM 15,000. Indirect wages: 20,000 − 15,000 = RM 5,000, a factory overhead.
3. (Easy) Opening raw materials are RM 2,000, purchases RM 15,000 and closing raw materials RM 2,500. Find the raw materials used.
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2,000 + 15,000 = 17,000. 17,000 − 2,500 = RM 14,500.
4. (Medium) Raw materials used are RM 14,500, direct wages RM 11,000 and a direct royalty RM 500. Find the prime cost.
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14,500 + 11,000 + 500 = RM 26,000.
5. (Medium) Kilang Roti Sentosa has purchases of RM 40,000, returns outwards RM 1,500, carriage inwards RM 800, opening raw materials RM 3,000, closing raw materials RM 2,800 and direct wages RM 25,000. Find the prime cost.
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Net purchases: 40,000 − 1,500 + 800 = 39,300. Add opening: 39,300 + 3,000 = 42,300. Less closing: 42,300 − 2,800 = 39,500 raw materials used.
Prime cost: 39,500 + 25,000 = RM 64,500.
6. (Medium) A factory has indirect wages RM 7,500, factory rent RM 9,000, power RM 3,200, machine depreciation RM 2,800 and office salaries RM 6,000. Find the total factory overheads.
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Office salaries are not a production cost. 7,500 + 9,000 + 3,200 + 2,800 = RM 22,500.
7. (Medium) Prime cost is RM 64,500 and factory overheads are RM 22,500. Opening work in progress is RM 3,500 and closing work in progress is RM 4,200. Find the factory cost of production.
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64,500 + 22,500 = 87,000. Add opening WIP: 90,500. Less closing WIP: 90,500 − 4,200 = RM 86,300.
8. (Medium) Prime cost is RM 50,000, factory overheads RM 18,000 and opening work in progress RM 2,000. The factory cost of production is RM 66,500. Find the closing work in progress.
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50,000 + 18,000 + 2,000 = 70,000. Closing WIP = 70,000 − 66,500 = RM 3,500.
9. (Harder) The factory cost of production is RM 86,300. Opening finished goods are RM 7,000, closing finished goods RM 9,500 and sales RM 120,000. Find the cost of sales and the gross profit.
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Cost of sales: 7,000 + 86,300 − 9,500 = RM 83,800. Gross profit: 120,000 − 83,800 = RM 36,200.
10. (Harder) Kilang Mee Segar has opening raw materials RM 1,800, purchases RM 21,000, returns outwards RM 600, closing raw materials RM 2,200, direct wages RM 14,000, indirect wages RM 4,500, factory rent RM 3,600, power RM 2,100, machine depreciation RM 1,800, opening work in progress RM 1,200 and closing work in progress RM 1,700. Prepare the figures for the manufacturing account: raw materials used, prime cost, factory overheads and factory cost of production.
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Raw materials used: 1,800 + 21,000 − 600 − 2,200 = RM 20,000.
Prime cost: 20,000 + 14,000 = RM 34,000.
Factory overheads: 4,500 + 3,600 + 2,100 + 1,800 = RM 12,000.
Factory cost of production: 34,000 + 12,000 = 46,000. Add opening WIP 1,200 and subtract closing WIP 1,700: 46,000 + 1,200 − 1,700 = RM 45,500.
11. (Harder) A factory and its office share a building. Rent is RM 18,000, shared factory to office in the ratio 5 : 1. Insurance is RM 2,400, shared three quarters factory and one quarter office. Find the amounts charged to factory overheads and to office expenses. State the effect on the factory cost of production if all of these costs were wrongly charged as office expenses.
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Rent: factory 18,000 × 5/6 = 15,000. Office 18,000 × 1/6 = 3,000.
Insurance: factory 2,400 × 3/4 = 1,800. Office 2,400 × 1/4 = 600.
Factory overheads: 15,000 + 1,800 = RM 16,800. Office expenses: 3,000 + 600 = RM 3,600. Check: 16,800 + 3,600 = 20,400 = 18,000 + 2,400.
If all were charged as office expenses, the factory cost of production would be understated by RM 16,800, and the profit would be understated by the share of that amount that belongs to unsold goods.
12. (Harder) A student reports prime cost of RM 52,000 and factory overheads of RM 14,000, with no work in progress. The direct wages figure includes RM 4,000 paid to a factory supervisor. Correct the prime cost and the factory overheads, and state whether the factory cost of production changes.
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The supervisor’s wages are indirect. Correct prime cost: 52,000 − 4,000 = RM 48,000. Correct factory overheads: 14,000 + 4,000 = RM 18,000.
Factory cost: 48,000 + 18,000 = 66,000, and the reported figures also give 52,000 + 14,000 = 66,000. The factory cost of production does not change, so cost of sales and gross profit are not affected. The subtotals, which an examiner may ask for, are wrong.
If you got these wrong
| What went wrong | Go to |
|---|---|
| Put supervisors or office staff in the wrong group (questions 1, 2, 6, 12) | Distinguish direct and indirect production costs |
| Wrong materials used or prime cost (questions 3, 4, 5, 10) | Calculate prime cost |
| Opening and closing work in progress reversed (questions 7, 8, 10) | Adjust for work in progress |
| Skipped finished goods or double-counted purchases (question 9) | Transfer production cost to the trading calculation |
| Shared costs placed in one statement only (questions 11, 12) | Why a factory cost is not necessarily an office expense |
Record each slip in the mistake log and retest queue and retry a fresh question later. The double-entry and ledger trainer is useful for seeing where each cost is posted, and the percentage-base explorer helps when a share of a cost is given as a percentage.
Students who want someone to follow each line of working as they write it can consider online one-to-one Accounting tuition.