Edexcel IGCSE Accounting: Financial statements of a manufacturer (4AC1) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

This set covers Topic 4, section 4.5, Financial statements of a manufacturer, in the Pearson Edexcel International GCSE in Accounting (4AC1) specification, Issue 1, October 2016: the three kinds of inventory and the manufacturing account showing prime cost, total cost and production cost. All amounts are in dollars and all businesses are invented. Questions 9 to 11 build on the earlier skills.

Links: Edexcel IGCSE Accounting hub, printable checklist, study guide, revision notes and the free 10-minute diagnostics.

Questions

1. Brenfold Shoes makes leather shoes. At the year end it holds: rolls of leather in the store; shoes with the uppers stitched but no soles fitted; boxed pairs ready for despatch; and reels of thread not yet used. State whether each of the four items is raw materials, work-in-progress or finished goods. [4]

2. At the year end Brenfold Shoes counts closing inventories of all three kinds. State where each closing inventory is dealt with in the final accounts of the business. [4]

3. State whether each cost of Brenfold Shoes is a prime cost item, a factory overhead or not a factory cost.

(a) Wages of the workers who stitch the shoes. [1] (b) Wages of the factory cleaner. [1] (c) Royalty paid for each pair made under a licensed design. [1] (d) Advertising in a fashion magazine. [1]

4. Dovrel Plastics had opening inventory of raw materials 8,200, purchases of raw materials 64,500, carriage inwards 1,350, returns outwards 2,050 and closing inventory of raw materials 9,100. Calculate the raw materials consumed. [4]

5. Dovrel Plastics: raw materials consumed 62,900; manufacturing wages 41,800; royalties on units made 2,600; wages of the factory supervisor 9,300; factory power 7,300.

(a) Calculate the prime cost. [3] (b) State two items from the list that are not part of prime cost, giving a reason. [2]

6. Dovrel Plastics: rent and rates for the whole site 27,000, of which two-thirds relates to the factory; insurance 6,000, of which half relates to the factory; indirect factory wages 18,400; factory power 7,300; depreciation of factory machinery 9,500; depreciation of office equipment 2,400. Calculate the total factory overheads. [5]

7. Dovrel Plastics has a prime cost of 107,300 and factory overheads of 56,200. Opening work-in-progress was 5,400 and closing work-in-progress was 6,900. Calculate the total cost and the production cost. [4]

8. Isleworth Toys has a prime cost of 72,400, factory overheads of 28,600, opening work-in-progress of 4,900 and a production cost of 103,300. Calculate the closing work-in-progress. [3]

9. Dovrel Plastics: production cost 162,000; revenue 241,000; opening inventory of finished goods 15,600; closing inventory of finished goods 12,900.

(a) Explain why the income statement of a manufacturer uses production cost and not purchases. [2] (b) Calculate the cost of sales and the gross profit. [3]

10. Korvane Cabinets, year ended 30 June 2027. Opening raw materials 7,600; purchases of raw materials 52,800; carriage inwards 1,200; closing raw materials 8,300; direct wages 36,500; hire of tools for one order 1,500; indirect factory wages 11,400; factory heating and lighting 6,200; depreciation of factory machinery 5,800; factory rent 9,000. Opening work-in-progress 3,900; closing work-in-progress 4,600. Prepare the manufacturing account, showing the prime cost, the total cost and the production cost. [10]

11. Trennick Metalworks, year ended 31 December 2026. Raw materials: opening 5,900, purchases 38,200, carriage inwards 900, returns outwards 700, closing 6,400. Direct wages 27,300. Factory overheads: indirect wages 8,100, power 4,700, depreciation of machinery 3,900, factory insurance 1,600. Work-in-progress: opening 2,800, closing 2,300. Finished goods: opening 11,200, closing 13,500. Revenue 148,000.

(a) Prepare the manufacturing account, showing the prime cost, the total cost and the production cost. [6] (b) Prepare the income statement down to gross profit. [4] (c) Show the inventories as they appear in current assets on the statement of financial position. [2]

Answers

1. Leather rolls: raw materials [1]. Stitched shoes without soles: work-in-progress [1]. Boxed pairs: finished goods [1]. Thread: raw materials [1]. [4] Examiner insight: Give the category for each item, not a definition of all three. Thread is a material that has not yet been used, so it is raw materials even though it is small in value.

2. Closing raw materials is deducted in the manufacturing account to find raw materials consumed [1]. Closing work-in-progress is deducted in the manufacturing account in the work-in-progress adjustment [1]. Closing finished goods is deducted in the income statement when finding cost of sales [1]. All three are shown as inventories in current assets in the statement of financial position [1]. [4] Examiner insight: Name the statement and the line. “In the accounts” is too vague to earn credit for a placement question.

3. (a) Prime cost (direct wages) [1]. (b) Factory overhead (indirect wages) [1]. (c) Prime cost (a direct expense) [1]. (d) Not a factory cost; it is a selling expense in the income statement [1]. [4] Examiner insight: A royalty per unit made is traced to the goods, so it is direct. It is easy to place it with overheads because it is neither wages nor materials.

4. Start with the opening inventory: 8,200 + 64,500 [1]. Add carriage inwards and deduct returns outwards: 8,200 + 64,500 + 1,350 - 2,050 = 72,000 [1]. Deduct closing inventory: 72,000 - 9,100 [1]. Raw materials consumed 62,900 [1]. [4] Examiner insight: Carriage inwards is added and returns outwards are deducted. Writing the formula before the figures makes the sign of each item easier to check.

5. (a) Prime cost = 62,900 + 41,800 + 2,600 [1][1] = 107,300 [1]. [3] (b) Wages of the factory supervisor (indirect, so a factory overhead) [1]. Factory power (cannot be traced to particular goods, so a factory overhead) [1]. [2] Examiner insight: A reason is needed as well as the item. Say “indirect” or “cannot be traced to the goods”, not just “overhead”.

6. Rent and rates: 27,000 x 2/3 = 18,000 [1]. Insurance: 6,000 x 1/2 = 3,000 [1]. Depreciation of office equipment is excluded because it is not a factory cost [1]. Overheads to add: 18,400 + 18,000 + 3,000 + 7,300 + 9,500 [1]. Total factory overheads 56,200 [1]. [5] Examiner insight: Show each apportioned share on its own line. The office shares and the office depreciation belong in the income statement, so leave them out of the total.

7. Total cost = 107,300 + 56,200 [1] = 163,500 [1]. Production cost = 163,500 + 5,400 - 6,900 [1] = 162,000 [1]. [4] Examiner insight: Opening work-in-progress is added and closing is deducted. Giving the total cost and the production cost as separate answers is safer than one final figure.

8. Total cost = 72,400 + 28,600 = 101,000 [1]. Closing work-in-progress = total cost + opening work-in-progress - production cost = 101,000 + 4,900 - 103,300 [1] = 2,600 [1]. [3] Examiner insight: For a missing figure, rearrange the formula and then check by running forwards: 101,000 + 4,900 - 2,600 = 103,300.

9. (a) A manufacturer makes its goods rather than buying them [1]. Production cost is the cost of making the goods completed in the year, so it is used in place of purchases [1]. [2] (b) Cost of sales = 15,600 + 162,000 - 12,900 [1] = 164,700 [1]. Gross profit = 241,000 - 164,700 = 76,300 [1]. [3] Examiner insight: An explanation needs the reason, not a restatement. Remember that the finished goods adjustment is still needed in the income statement.

10.

Korvane Cabinets
Manufacturing account for the year ended 30 June 2027

Opening inventory of raw materials                  7,600
Add Purchases of raw materials         52,800
Add Carriage inwards                    1,200       54,000
                                                    61,600
Less Closing inventory of raw materials             (8,300)
Raw materials consumed                              53,300
Direct wages                                        36,500
Hire of tools for one order                          1,500
PRIME COST                                          91,300
Factory overheads
  Indirect factory wages               11,400
  Factory heating and lighting          6,200
  Depreciation of factory machinery     5,800
  Factory rent                          9,000       32,400
TOTAL COST                                         123,700
Add Opening work-in-progress                         3,900
Less Closing work-in-progress                       (4,600)
PRODUCTION COST                                    123,000

Heading naming the business, the account and the date [1]. Raw materials consumed 53,300 [1][1]. Prime cost 91,300 [1][1]. Factory overheads listed and totalled 32,400 [1][1]. Total cost 123,700 [1]. Work-in-progress adjustment and production cost 123,000 [1][1]. [10] Examiner insight: Label the three totals as the question asks. A tidy layout with each subtotal on its own line makes it clear which figure is prime cost, which is total cost and which is production cost.

11. (a)

Trennick Metalworks
Manufacturing account for the year ended 31 December 2026

Opening inventory of raw materials                  5,900
Add Purchases of raw materials         38,200
Add Carriage inwards                      900
Less Returns outwards                    (700)      38,400
                                                    44,300
Less Closing inventory of raw materials             (6,400)
Raw materials consumed                              37,900
Direct wages                                        27,300
PRIME COST                                          65,200
Factory overheads
  Indirect wages                        8,100
  Power                                 4,700
  Depreciation of machinery             3,900
  Factory insurance                     1,600       18,300
TOTAL COST                                          83,500
Add Opening work-in-progress                         2,800
Less Closing work-in-progress                       (2,300)
PRODUCTION COST                                     84,000

Raw materials consumed 37,900 [1][1]. Prime cost 65,200 [1]. Factory overheads 18,300 [1]. Total cost 83,500 [1]. Production cost 84,000 [1]. [6]

(b)

Income statement (extract) for the year ended 31 December 2026
Revenue                                            148,000
Opening inventory of finished goods    11,200
Add Production cost                    84,000
                                       95,200
Less Closing inventory of finished goods (13,500)
Cost of sales                                       81,700
GROSS PROFIT                                        66,300

Production cost brought from the manufacturing account with the finished goods adjustment [1]. Cost of sales 81,700 [1][1]. Gross profit 66,300 [1]. [4]

(c) Inventories in current assets: raw materials 6,400, work-in-progress 2,300 and finished goods 13,500 shown separately [1]; total 22,200 [1]. [2] Examiner insight: In a long question, carry the production cost forward cleanly. Showing the working in every part makes your method clear, so a slip in part (a) is easier to trace and need not spoil later parts.

Where marks are usually lost

• Using purchases instead of raw materials consumed in prime cost.
• Adding returns outwards, or deducting carriage inwards, in the raw materials section.
• Treating the supervisor’s pay or other indirect wages as direct labour.
• Including the office share of rent, insurance or depreciation in factory overheads.
• Reversing the work-in-progress adjustment.
• Stopping at total cost and calling it production cost.
• Not totalling prime cost, total cost and production cost on clearly labelled lines.
• Forgetting the finished goods adjustment in the income statement.
• Showing only one total for inventories in current assets, when the three kinds were asked for separately.

Next steps

• Revise the formulas in the revision notes.
• Re-read the worked examples in the study guide.
• Open the Edexcel IGCSE Accounting hub and tick off topics on the printable checklist.
• Take one of the free 10-minute diagnostics.
• Book a free trial class at /trial/.

Frequently asked questions

Are a factory supervisor’s wages direct labour? No. Supervisors’, cleaners’ and maintenance staff wages are indirect, so they are factory overheads. Treating them as direct labour inflates prime cost and is a common error in Edexcel IGCSE Accounting (4AC1) questions.

How do you deal with costs shared between the factory and the office? Apportion the cost using the fraction the question gives: only the factory share goes in the manufacturing account as an overhead, and the office share goes in the income statement as an expense.

Why is opening work-in-progress added and closing work-in-progress deducted? Opening work-in-progress was started last year but finished this year, so its costs belong to this year’s output. Closing work-in-progress is unfinished, so its costs belong to next year’s output; reversing the adjustment is a common error.

How do you find a missing figure in a manufacturing account? Work backwards using the formulas. For example, closing work-in-progress equals total cost plus opening work-in-progress minus production cost.

Official syllabus

Pearson Edexcel International GCSE in Accounting (4AC1) specification, Issue 1, October 2016, published by Pearson Education Limited – Topic 4: The preparation of financial statements, section 4.5 Financial statements of a manufacturer, points (a) and (b).