Concept:Manufacturing account is prepared to compute the total cost of items completed in a factory during an accounting period.
Explanation:This account includes direct materials, direct labour, and factory overheads.
These costs are added together to obtain prime cost and then manufacturing cost.
Opening and closing work-in-progress values are adjusted to find the actual cost of finished goods.
Formula used:
Cost of goods produced=Prime cost+Factory overheads+Opening work-in-progress−Closing work-in-progressThe final balance shown by the manufacturing account is the cost of goods produced, not the cost of goods sold or profit.
Cost of goods sold is computed later in the trading account by adjusting opening and closing finished stock.
Answer:B. cost of goods produced