Theory question 108
Manufacturing AccountsEasyway Limited produces disposable products for the health sector. Information available for the year ended 31st December, 2021 is as follows:
Sales: GH¢342,000
Raw materials purchased: GH¢140,500
Direct labour: GH¢70,300
Depreciation of plant and machinery: GH¢24,400
Delivery expenses: GH¢10,000
Discounts allowed: GH¢5,000
Direct expenses: GH¢10,000
Rent: GH¢12,000
Electricity: GH¢13,000
Depreciation of vehicles: GH¢5,600
Stocks (01/01/2021 / 31/12/2021): Raw materials GH¢60,400 / GH¢52,600; Work-in-progress GH¢45,000 / GH¢40,200; Finished goods GH¢39,200 / GH¢20,900
Additional information: Apportion rent, electricity and depreciation of vehicles to factory and office in the ratio 3:2 respectively.
You are required to prepare Manufacturing, Trading, Profit and Loss Account for the year ended 31st December, 2021.
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Manufacturing (GH¢): raw materials 60,400 + 140,500 − 52,600 = 148,300; direct labour 70,300; direct expenses 10,000; Prime cost 228,600.
Factory overheads: depreciation of plant 24,400; rent (3/5) 7,200; electricity (3/5) 7,800; depreciation of vehicles (3/5) 3,360 = 42,760; total 271,360; add opening WIP 45,000, less closing WIP 40,200; Production cost 276,160.
Trading: sales 342,000; finished goods 39,200 + 276,160 − 20,900 = cost of sales 294,460; Gross profit 47,540.
Profit and loss: delivery 10,000; discounts allowed 5,000; rent (2/5) 4,800; electricity (2/5) 5,200; depreciation of vehicles (2/5) 2,240 = 27,240; Net profit GH¢20,300.
Split rent, electricity and vehicle depreciation 3:2 before building the accounts.