Notes, Exercises, Videos, Tests and Things to Remember on Meaning and Preparation of Manufacturing Account & Tender
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There are some manufacturing concerns which do not have cost office and do not prepare cost accounts. Such manufacturing concerns ascertain the cost of goods manufactured and manufacturing profit or loss during the year. So, it is an account prepared by the manufacturing concern for the purpose of finding out the cost of production of the goods manufactured and the profit that has been made by manufacturing department. When the data related to the cost of goods manufactured of a commodity are presented in a conventional form of account i.e T-shape form, then it is known as manufacturing account. Generally, manufacturing concerns prepare this account to exhibit cost of production or cost of goods manufactured.
The manufacturing account is prepared either to ascertain the cost of goods manufactured or manufacturing profit or loss. So, it is prepared in two ways:
For the production of the materials, opening stock of WIP, direct wages and all other expenses relating to the factory are debited. Closing stock of WIP and amount credit from the sale of scrap are audited and the balance figure is shown on credit side would be the cost of production.
If a manufacturing account is prepared to show the manufacturing profit or loss, all the items shown in the debit side of the previous format of manufacturing account are also entered on the debit side of this account. On the credit side, closing stock of work in progress, the sale of scrap and current trading price are shown and the balance figure arrived on the debit side would be the manufacturing profit.
A manufacturer has to quote the price of its product for tender at which it can supply its product to a customer. Tender or quotation price is a price at which the company can provide its product. This price also includes a reasonable profit. For this purpose, an estimated cost sheet has to be prepared on the basis of the cost of the preceeding period along with the consideration of likely changes in future.
Tender is a formal offer to supply goods or carry out work at a stated price. For this purpose, an estimated cost sheet has to be prepared and forwarded to the customers who demands products.
3. Thirdly, prepare tender sheet:
Profit for tender is as follows:
|Stock of materials on 1-1-2011||35,000|
|Stock of materials on 31-12-2011||4,900|
|Purchase of materails||52,500|
|Completed stock in hand on 1-1-2011||Nill|
|Completed stock in hand on 31-12-2011||35,000|
The number of stoves manufactured during the year 2011 was 4,000.
The company wants to quote for a contract for the supply of 1,000. Electric Stoves during the year 2012. The stove to be quoted are uniform quality and make and similar to those manufactured in the previous year, but the cost of the materials has increased by 15% and the cost of the factory labor by 10%.
Prepare the statement showing the price to be quoted to give the same percentage of net profit on a turnover as was realized during the year 2011, assuming that the cost per unit of overheads will be the same as in the previous.
Koirala, Madhav et.al., Principles of Accounting -XII, Buddha Prakashan, Kathmandu
Shrestha, Dasharatha et.al., Accountancy -XII, M.K. Prakashan, Kathmandu
Bajracharya, Puskar, Principle of Accounting-XII, Asia Publication Pvt. Ltd., Kathmandu