Sandar Manufacturing makes a single product. The following balances were extracted from the books at the end of the financial year on 30 September 2012: Inventory at 1 October 2011: Raw materials Work in progress Finished goods Purchases of raw materials Carriage Production wages Office wages Sundry office expenses Production manager's salary Factory rent, rates and power Royalties General factory expenses Premises maintenance Factory machinery (at cost) Factory machinery – provision for depreciation Inventory at 30 September 2012: Raw materials Work in progress Finished goods Additional information at 30 September 2012: 1 60% of the carriage relates to raw materials and 40% to goods sold. 2 General factory expenses owing $400. 3 70% of the maintenance relates to the factory premises and 30% to the office premises. 4 Factory machinery is depreciated at the rate of 15% per annum using the diminishing (reducing) balance method. REQUIRED

1. (a)Prepare the manufacturing account for the year ended 30 September 2012. Clearly label the prime cost and cost of production.[16]
2. (b)Explain the term direct cost.[2]
3. (c)Give one example of a direct cost from the balances on page 7.[2]