Definition and Explanation
Production cost is also known as factory cost and cost of goods manufactured. It is the sum of prime cost and production overheads. This figure is presented in a special ledger account called the manufacturing account.
The balance of the manufacturing account discloses the total cost of goods manufactured, which is then transferred to the trading account.
Prepare a manufacturing account from the information below. This information was taken from the books of a manufacturing concern.
In this example, depreciation on plant is to be provided at 12.5% of cost.
About the Author
True Tamplin, BSc, CEPF®
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True contributes to his own finance dictionary, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.