Theory question 109
Manufacturing AccountsThe following information was extracted from the books of Dauda Manufacturing Company for the year ended 31st December, 2012. (D)
Stock of goods - 1st January, 2012: Raw materials 8,000; Finished goods 28,000; Work-in-progress 2,000
Purchases of raw materials 40,000
Carriage inwards 1,000
Manufacturing wages 100,000
Sales 390,000
Rent 50,000
Factory expenses 60,000
Royalties 1,500
Stock of goods - 31st December, 2012: Raw materials 6,000; Finished goods 26,000; Work-in-progress 1,500
Depreciation: Machinery 7,500; Delivery van 1,280
Selling expenses 3,000
Discount allowed 1,500
Additional information: (i) Factory expenses prepaid amounted to D5,000; (ii) Selling expenses accrued was D2,500; (iii) Rent is apportioned between factory and selling department in the ratio 5:3 respectively.
You are required to prepare: Manufacturing, Trading and Profit and Loss Account for the year ended 31st December, 2012.
Show the model answer
Manufacturing (D): raw materials - opening 8,000 + purchases 40,000 + carriage inwards 1,000 - closing 6,000 = 43,000; manufacturing wages 100,000; royalties 1,500; prime cost 144,500.
Factory overheads: depreciation of machinery 7,500; factory expenses (60,000 - 5,000) 55,000; factory rent (50,000 × 5/8) 31,250 = 93,750. Total 238,250; add opening WIP 2,000, less closing WIP 1,500; cost of production 238,750.
Trading: sales 390,000; cost of goods sold = 28,000 + 238,750 - 26,000 = 240,750; gross profit 149,250.
Profit and loss: rent (50,000 × 3/8) 18,750; selling expenses (3,000 + 2,500) 5,500; depreciation of delivery van 1,280; discount allowed 1,500 = 27,030. Net profit D122,220.
Delivery van depreciation is a selling cost, not a factory overhead.