Theory question 106
Manufacturing AccountsIdayah Limited is a manufacturing company. The following balances were extracted from its records on 31st December, 2014. (Le)
Stock on 01/01/2014: Raw materials 56,000; Work-in-progress 60,000; Finished goods 80,000
Purchases of raw materials 150,000
Carriage of raw materials 7,500
Manufacturing wages paid 16,500
Factory wages accrued 4,000
Direct factory expenses 11,400
Fuel for factory equipment 15,000
Depreciation of factory equipment 12,000
Sales of finished goods 500,000
Carriage outwards 7,600
General office expenses 3,800
Office Salaries 19,200
Stock 31/12/2014: Raw materials 40,000; Work-in-progress 64,000; Finished goods 72,000
Additional information: Goods manufactured were transferred to sales department at cost plus 10%. You are required to prepare Manufacturing, Trading and Profit and Loss Account for the year ended 31st December 2014.
Show the model answer
Manufacturing (Le): raw materials - opening 56,000 + purchases 150,000 + carriage 7,500 - closing 40,000 = 173,500; manufacturing wages (16,500 + 4,000) 20,500; direct factory expenses 11,400; prime cost 205,400.
Factory overheads: fuel 15,000; depreciation of equipment 12,000 = 27,000; total 232,400; add opening WIP 60,000, less closing WIP 64,000; cost of production 228,400. Manufacturing profit (10%) 22,840; transfer value 251,240.
Trading: sales 500,000; cost of goods sold = 80,000 + 251,240 - 72,000 = 259,240; gross profit 240,760.
Profit and loss: gross profit 240,760 + manufacturing profit 22,840 = 263,600; less carriage outwards 7,600, general office expenses 3,800, office salaries 19,200 = 30,600. Net profit Le 233,000.
Add the 10% manufacturing profit back in the profit and loss account.