Answer To Accounting Test Question No.Mfg 1 On Manufacturing Account

October 11th, 2008 Comments off
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Approach this question by :

(a) understanding the normal format of a manufacturing and trading account.

(b) do the expense adjustments by taking into consideration accruals and prepayments and allocating expenses solely due to manufacturing operations and then insert the final figures into (a)

Answer to Accounting Test Question No.Mfg.1

Jim Brothers

Manufacturing Account For The Year Ended 30 September Year 7

$

$

$

Raw materials

Opening stock-raw materials

7,450

Purchases of raw materials

128,740

Add: Carriage inwards

1,055

Less: Purchases returns

310

129,485

Raw materials available for production

136,935

Less: Closing stock

6,325

130,610

Add: Direct wages (W1)

188460

Add: Direct expenses

3,280

PRIME COST

322,350

Add: Production overhead

Rates(W2)

3,840

Light, heat and power(W3)

2,610

Indirect wages

14,320

Telephone(W4)

640

Factory repairs

2,215

Insurance(W5)

900

Salaries

38,000

Depreciation of plant & machinery (W6)

32,000

Depreciation of furniture & equipment(W7)

4,200

98,725

Production cost

421,075

Add: Opening Work-In-Progress

5,330

426,405

Less: Closing Work-In-Progress

6,105

Production cost of finished goods

420,300

Add: Manufacturing profit(15%) (W8)

63,045

Production cost transferred to Trading Account

483,345

Jim Brothers

Trading Account For The Year Ended 30 September Year 7

$

$

Sales

721,560

Less: Returns inwards

1,215

720,345

Less: Cost of sales

Opening stock-Finished goods

12,110

Add: Production cost

483,345

495,455

Less: Closing stock-Finished goods

15,255

480,230

Gross profit

240,115

Add: Manufacturing profit

63,045

303,160

Workings:

[ adjust the expenses like accruals and prepayment and to compute the expenses that relates only to manufacturing ]

W1

Direct Wages A/c

=$187,240+$1,220(accrued)= $188,460

W2

Rates A/c

=($5,250-$450) x $3,840

W3

Light, Heat & Power A/c

=$3,480 x 3/4 =$2,610

W4

Telephone A/c

=$960 x 2/3 =$640

W5

Insurance A/c

=($1,420-$220) x 3/4 =$900

W6

Depreciation of Plant & Machinery A/c

=$160,000 x 20% =$32,000

W7

Depreciation of Furniture & Equipment A/c

=$42,000 x 10% =$4,200

W8

Manufacturing profit

=$420,300 x 15% =$63,045

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