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Manufacturing account 
Elements of cost
Section 10
Objective 1
Do you
know how
snickers is
made?
Lets Look
at the
following
video
https://www.youtube.com/watch?v=ZXAWU7hiseQ&list=PL0vRmiTj6a6NV2rCe1_tJaW8
uT_bqPDb4&index=2
https://www.youtube.com/watch?v=ZXAWU7hiseQ&list=PL0vRmiTj6a6NV2rCe1_tJaW8
uT_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
https://www.youtube.com/watch?v=ZXAWU7hiseQ&list=PL0vRmiTj6a6NV2rCe1_tJaW8
uT_bqPDb4&index=2
The costs needed to calculate cost of production:
 Raw materials
 Labour
 Operating the factory/ production area
Cost of making the product
https://www.youtube.com/watch?v=ZXAWU7hiseQ&list=PL0vRmiTj6a6NV2rCe1_tJaW8
uT_bqPDb4&index=2
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
category
Direct Cost
https://www.youtube.com/watch?v=ZXAWU7hiseQ&list=PL0vRmiTj6a6NV2rCe1_tJaW8
uT_bqPDb4&index=2
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
https://www.youtube.com/watch?v=ZXAWU7hiseQ&list=PL0vRmiTj6a6NV2rCe1_tJaW8
uT_bqPDb4&index=2
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?
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Elements of cost