Direct Materials: These are the costs of the raw materials that can be directly traced to a specific product. In the case of ABC Manufacturing, the wood, screws, and glue used to make the table are direct materials. They are a fundamental part of the finished product.

Direct Labour: This refers to the wages paid to workers who are directly involved in the manufacturing process. The wages of the person assembling the table are direct labour costs.

Prime Cost: This is the sum of direct materials and direct labour. It represents the direct costs incurred in producing a product before any factory overheads are added.

Factory Overheads: These are indirect costs incurred in the factory, such as rent, utilities, depreciation of machinery, and supervisor salaries. They cannot be directly traced to a specific product but are necessary for the overall operation of the factory.

Calculation of Prime Cost:

Prime Cost = Direct Materials + Direct Labour

Prime Cost = £20 + £15 = £35

Therefore, the prime cost of one table is £35.

Calculation:

1. Direct Materials Consumed: £15,000 - £3,000 = £12,000
2. Direct Labour: £10,000
3. Factory Overheads: £7,000
4. Total Factory Costs = £12,000 + £10,000 + £7,000 = £29,000
5. Cost of Goods Sold (COGS) = Opening Stock + Production Cost - Closing Stock
6. COGS = £4,000 + £29,000 - £3,000 = £30,000

Answer: The factory cost of production is £29,000 and the cost of goods sold is £30,000.

Calculation of Cost of Jobs Completed:

1. Cost of jobs started in June: Direct Materials Used + Direct Labour = £25,000 + £18,000 = £43,000
2. Cost of jobs completed: Cost of jobs started - Closing Work in Progress = £43,000 - £10,000 = £33,000

Adjustments to Work in Progress Account:

The Work in Progress account needs adjustment as follows:

• Credit (Increase): The Work in Progress account should be credited by £10,000 to reflect the amount of jobs completed during the month. This reduces the balance of Work in Progress.
• Debit (Decrease): The Direct Materials Used and Direct Labour costs incurred during the month should be debited to the Work in Progress account. This reflects the cost of jobs currently in production.

Summary of Adjustments:

Therefore, the cost of jobs completed during June is £33,000.