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Question 3.5: Manufacturing section of the income statement for a manufact...

Manufacturing section of the income statement for a manufacturing business

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Raw materials

Opening balance

Plus Purchases and carriage

Less Closing balance

= Cost of raw materials used

Plus Direct labour (i.e. labour worked directly on production)

Royalties

Gives a figure known as Prime cost

Add Factory overheads

Rent and rates

Indirect labour (ancillary labour costs related to production)

Indirect materials (typically small items that cannot be related to individual jobs)

Power

Heat and light

Depreciation of plant and equipment

Plus Opening balance of work-in-progress

Less Closing balance of work-in-progress

= Cost of goods produced

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