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Pick up the correct answer from the given choices(only one correct answer):
Q. The manufacturing account is prepared:
- a)to ascertain the profit or loss on the goods produced
- b)to ascertain the cost of the manufactured goods
- c)to show the sale proceeds from the goods produced during the year
- d)both (b) and (c)
Correct answer is option 'B'. Can you explain this answer?
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Pick up the correct answer from the given choices(only one correct ans...
Manufacturing account is prepared to know the cost of goods manufactured and it is related with production but not with profit/loss or sale.
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Pick up the correct answer from the given choices(only one correct ans...
Explanation:
The manufacturing account is a financial statement that is prepared by a manufacturing company to determine the cost of goods manufactured during a specific period. It helps in ascertaining the cost of production and provides important information for determining the profitability of the business.
Purpose of preparing the manufacturing account:
The correct answer to the given question is option 'b' - "to ascertain the cost of the manufactured goods." Let's understand why this is the correct answer in detail:
1. Calculation of Cost of Goods Manufactured:
The manufacturing account helps in calculating the cost of goods manufactured by including the direct costs (such as raw materials, direct labor, and direct expenses) and indirect costs (such as factory overheads) incurred during the manufacturing process. These costs are debited to the manufacturing account and provide a comprehensive view of all the expenses associated with the production of goods.
2. Valuation of Work-in-Progress:
The manufacturing account also helps in determining the value of work-in-progress inventory at the end of the accounting period. This is important for inventory valuation purposes and to determine the accurate cost of goods sold.
3. Calculation of Gross Profit:
While the manufacturing account is primarily prepared to ascertain the cost of goods manufactured, it indirectly helps in calculating the gross profit of the business. The gross profit is calculated by deducting the cost of goods sold (which includes the cost of goods manufactured) from the net sales revenue.
4. Comparison and Analysis:
By preparing the manufacturing account, a manufacturing company can compare the cost of goods manufactured with the sales revenue generated. This analysis helps in evaluating the efficiency of the manufacturing process and identifying areas for cost reduction or process improvement.
Conclusion:
In conclusion, the manufacturing account is prepared to ascertain the cost of the manufactured goods. It provides a comprehensive view of all the costs incurred during the manufacturing process and helps in determining the cost of production, valuation of work-in-progress inventory, calculation of gross profit, and analysis of the manufacturing efficiency.
The manufacturing account is a financial statement that is prepared by a manufacturing company to determine the cost of goods manufactured during a specific period. It helps in ascertaining the cost of production and provides important information for determining the profitability of the business.
Purpose of preparing the manufacturing account:
The correct answer to the given question is option 'b' - "to ascertain the cost of the manufactured goods." Let's understand why this is the correct answer in detail:
1. Calculation of Cost of Goods Manufactured:
The manufacturing account helps in calculating the cost of goods manufactured by including the direct costs (such as raw materials, direct labor, and direct expenses) and indirect costs (such as factory overheads) incurred during the manufacturing process. These costs are debited to the manufacturing account and provide a comprehensive view of all the expenses associated with the production of goods.
2. Valuation of Work-in-Progress:
The manufacturing account also helps in determining the value of work-in-progress inventory at the end of the accounting period. This is important for inventory valuation purposes and to determine the accurate cost of goods sold.
3. Calculation of Gross Profit:
While the manufacturing account is primarily prepared to ascertain the cost of goods manufactured, it indirectly helps in calculating the gross profit of the business. The gross profit is calculated by deducting the cost of goods sold (which includes the cost of goods manufactured) from the net sales revenue.
4. Comparison and Analysis:
By preparing the manufacturing account, a manufacturing company can compare the cost of goods manufactured with the sales revenue generated. This analysis helps in evaluating the efficiency of the manufacturing process and identifying areas for cost reduction or process improvement.
Conclusion:
In conclusion, the manufacturing account is prepared to ascertain the cost of the manufactured goods. It provides a comprehensive view of all the costs incurred during the manufacturing process and helps in determining the cost of production, valuation of work-in-progress inventory, calculation of gross profit, and analysis of the manufacturing efficiency.
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Pick up the correct answer from the given choices(only one correct answer):Q. The manufacturing account is prepared:a)to ascertain the profit or loss on the goods producedb)to ascertain the cost of the manufactured goodsc)to show the sale proceeds from the goods produced during the yeard)both (b) and (c)Correct answer is option 'B'. Can you explain this answer?
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