Chapter 2: Manufacturing & Trading Statements Chapter Review Solutions 1. ( a ) Direct Material Cost Inventory 1/7/09 5,000 Purchases 25,000 30,000 Less Inventory 30/6/10 4,000 26,000 ( b ) Direct Material Cost Inventory 1/7/08 4,000 Purchases 26,000 Freight on Purchases 1,000 31,000 Less Inventory 30/6/10 3,000 28,000 ( c ) Direct Material Cost Inventory 1/7/09 5,000 Purchases 32,000 Freight & Other Charges 1,000 38,000 Less Inventory 30/6/10 8,000 30,000 ( d ) Direct Material Cost Inventory 1/7/09 5,000 Purchases 30,000 Freight 1,000 Duty & Landing Charges 2,000 38,000 Less Inventory 30/6/10 6,000 32,000 ( e ) Direct Material Cost Work in Progress 1/7/10 1,200 Inventory 1/7/10 6,500 Purchase 27,300 Freight Inwards 800 35,800 Less Work in Progress 30/6/11 700 Inventory 30/6/11 1,100 1,800 34,000 11
Management Accounting in Australia - Solutions 2. 3. 4. 5. 6. Costs Paid 48,000 Less. Accrued 1/7/09 1,400 46,600 Add DIRECT LABOUR. Accrued 30/6/10 2,200 48,800 Cost Paid 56,000 Less. Accrued 1/7/09 3,200 52,800 Add. Accrued 30/6/10 2,200 55,000 Work in Progress 1/7/09 11,800 Paid 52,000 + Accrued 30/6/10 1,100 Less Accrued 1/7/09 1,600 51,500 63,300 Less Work in Progress 30/6/10 3,300 60,000 Manufacturing Overhead Factory Insurance 400 Factory Light & Power 1,800 Indirect Labour ( 400 + 15,000-400 ) 15,200 Machinery Repairs 1,300 Depreciation Machinery 5,900 Indirect Material ( 1,700 + 5,100-1,400 ) 5,400 30,000 Costs for the Period Manufacturing Overhead Work in Progress 1/7/09 2,200 Factory Insurance ( 500-100 ) 400 Factory Light & Power 2,300 Indirect Labour ( 17,000 + 600-400 ) 17,200 Machinery Repairs 400 Depreciation Machinery 4,500 Indirect Materials ( 1,400 + 7,000-1,600 ) 6,800 33,800 Less Work in Progress 30/6/10 1,800 32,000 7. By using method as in solution 5, number manufactured equals 7,000 W.I.P. O/bal 12,800 F.G.s 112,000 Cost of Prod 112,800 C/bal 13,600 125,600 125,600 Therefore cost per unit = $16.00 ( 112,000 / 7,000 ) 12
8. Factory Rates paid during year 2,500 Add Back prepayments 1/7/2009 1,200 3,700 Add Accrued 30/6/2010 600 To Manufacturing Account 4,300 9. Manufacturing Account O / bal Work in Progress 4,000 Trading Account 30,000 Direct Material 12,000 Cost of Production 8,000 Overhead 8,000 32,000 C/bal Work in Progress 2,000 30,000 30,000 10. ( a ) Raw Material Cost Work in Progress 1/7/08 2,000 Inventory 1/7/08 10,000 Purchases 60,000 Freight Inwards 2,000 Duty 5,000 79,000 Less Work in Progress 30/6/09 6,000 Inventory 30/6/09 16,000 22,000 57,000 ( b ) Cost Work in Progress 1/7/09 2,000 Labour ( 25,000 + 2,000-1,000 ) 26,000 28,000 Less Work in Progress 30/6/10 6,000 22,000 ( c ) Prime Cost Raw Materials 57,000 22,000 79,000 13
Management Accounting in Australia - Solutions 11. Raw Materials Hopcraft Manufacturing Co. Pty Ltd Manufacturing Statement Year Ended 30/06/2009 Inventory 01/07/08 20,000 Purchases 91,000 111,000 Less Inventory 30/06/09 24,000 87,000 Wages Paid 58,800 58,800 Indirect Labour 17,800 Depreciation - Factory Plant 6,800 Factory Supplies 500 Sundry Expenses 28,500 53,600 199,400 Plus Work in Progress 01/07/08 8,600 208,000 Less Work in Progress 30/06/09-18,000 Cost of Goods Manufactured 190,000 14
12. Manufacturing Statement for the year ended 30 June 2009 Inventory 1/07/08 7,500 Purchases 46,500 54,000 Less Inventory 30/06/09 4,000 50,000 Labour paid 20,000 20,000 Supervisor 7,800 Depreciation - Manufacturing Plant 2,300 Factory Rates 5,200 Factory Supplies ( 1,400 400 ) 1,000 Insurance 1,100 Power 3,100 Repairs to Plant 4,200 24,700 Cost of Production this period 94,700 Work in Progress 01/07/08 13,300 108,000 Work in Progress 30/06/09-8,000 Cost of Goods Manufactured 100,000 15
Management Accounting in Australia - Solutions 13. Conway Production Company Manufacturing Statement 31 December 2009 Direct Material Inventory 01/01/09 40,000 Purchases 180,000 Import Duty 5,000 225,000 Less Inventory 31/12/ 09 30,000 195,000 Labour Paid 290,000 290,000 Indirect Labour 70,000 Depreciation 25,000 Faculty Power, Light & Fuel 6,000 Factory Supervisors Salaries 64,000 Sundry Factory Expenses 80,000 245,000 Total Factory Costs Incurred 730,000 Add Work in Progress 01/01/09 45,000 775,000 Less Work in Progress 31/12/ 09-25,000 Cost of Goods Manufactured 750,000 Trading Statement Sales 1,200,000 Less Cost of Goods Sold Inventory 01/01/ 09 110,000 Cost of Production 750,000 Purchases - Finished Goods 150,000 Freight Inwards on Finished Goods 12,000 Import Duty 18,000 Cost of Goods available for Sale 1,040,000 Less Inventory Finished Goods 31/12/ 09 140,000 900,000 Gross Profit 300,000 16
14. Rex Manufacturing Company Pty Ltd -Manufacturing Statement 31 December 2009 Inventory 01/01/09 8,400 Purchases 45,100 Duty on Raw Materials 1,400 54,900 Less Inventory 31/12/ 09 6,900 48,000 Labour Paid 62,000 62,000 Indirect Labour 13,200 Holiday and Sick Pay 12,300 Factory Power, Light & Fuel 1,800 Factory Managers Salary 18,600 Sundry Factory Expenses 7,800 Depreciation Factory Plant 2,300 56,000 Cost of Production 166,000 Work in Progress 01/01/ 09 4,000 Less Work in Progress 31/12/ 09-10,000 Cost of Goods Manufactured 160,000 15. P. Hogan Manufacturing Statement - 30 June, 2009 Inventory 01/01/09 1,000 Purchases 145,000 Freight Inwards 400 146,400 Less Inventory 30/06/09-1,500 144,900 Labour ( 72,000 + 500 600 ) 71,900 71,900 Factory Rent 50,000 Factory Supplies 2,000 Depreciation Factory Plant 11,000 Electricity 4,000 Indirect Labour 6,500 73,500 Cost of Production 290,300 Work in Progress 01/01/09 1,200 291,500 Less Work in Progress 31/12/09-1,500 Cost of Goods Manufactured 290,000 17
Management Accounting in Australia - Solutions 16. Manufacturing Statement 30 June 2009 Inventory 1/7/ 08 3,200 Purchases 72,000 Duty on Raw Materials 3,200 Freight Inwards on Raw Material 3,600 82,000 Less Inventory 30/6/09-4,000 78,000 Labour ( 66,700 + 3,200 2,300 ) 67,600 67,600 Factory Supplies 01/07/ 08 2,400 Purchases 10,400 12,800 Factory Supplies 30/06/09 1,600 11,200 Insurance 400 Factory Light & Power 1,600 Factory Managers Salary 12,000 Foreman s Wages 8,000 Other Indirect Labour 6,400 Repairs to Machinery 2,000 Other Manufacturing Expenses 14,000 55,600 Cost of Production 201,200 Work in Progress 01/07/ 08 7,200 208,400 Less Work in Progress 30/06/ 09-11,200 Cost of Goods Manufactured 197,200 18
17. Amalfi Manufacturing Co Pty Ltd Manufacturing Statement 30 June 2009 Inventory 1/7/ 08 18,000 Purchases 100,000 Freight Inwards 5,000 123,000 Less Inventory 30/6/ 09-19,000 104,000 Labour Paid 80,000 80,000 Factory Supplies 01/07/ 08 4,500 Purchases 10,000 14,500 Factory Supplies 30/06/09 5,500 9,000 Factory Expenses 45,400 Indirect Labour 20,000 74,400 Cost of Production 258,400 Work in Progress 1/7/ 08 5,500 263,900 Less Work in Progress 30/6/ 09 8,500 Cost of Goods Manufactured 255,400 Income Statement Sales 480,000 Less Cost of Goods Sold 290,400 Inventory 1/7/08 10,000 Cost of Production 255,400 Purchases of Finished Goods 35,000 Freight Inwards 1,000 301,400 Less Inventory 30/6/ 09 11,000 Gross Profit 189,600 Add other Operating Income 2,500 Discount Received 2,500 192,100 Less Expenditure Incurred 56,100 Marketing Expenses 11,000 Advertising 4,800 Freight Outwards 6,200 General & Administrative Expenses 42,000 Office Salaries 30,000 Office Rent & Other Expenses 12,000 Financial Expenses 3,100 Discount Allowed 1,100 Interest on Bank Loan 2,000 Net ( Operating ) Profit 136,000 19
Management Accounting in Australia - Solutions 18. ( a ) Pink Limited Manufacturing Statement for the Six Months Ended December 31 2009 ($000) ($000) ($000) Inventory 01/07/09 5 Purchases 255 Freight In 13 273 Less Inventory 31/12/09 48 225 Labour ( 215 5 + 4 ) 214 214 Factory Supplies 01/07/09 11 Purchases - Factory Supplies 27 38 Factory Supplies 31/12/09 14 24 Depreciation Plant 13 Depreciation Buildings 6 Indirect Wages 50 Expenses (112 + 5-3) 114 Factory Manager's Salary 20 227 Cost of Production 666 Work in Progress 01/07/09 14 680 Less Work in Progress 31/12/09 18 Cost of Goods Manufactured 662 ( b ) Pink Limited Trading Statement for the Six Months Ended December 31 2009 ($000) ($000) Sales 1,200 Less Cost of Goods Sold Opening Stock 25 Purchases 80 Freight Inwards 2 Cost of Goods Manufactured 662 769 Less Closing Stock 27 742 Gross Profit 458 20
19. Bal 01/06/09 60,000 Purchases 240,000 300,000-65,000 235,000 Paid & Accrued ( 74,000 + 1,000 ) 75,000 75,000 Factory Supplies 01/06/09 6,000 Purchases 18,000 24,000 Factory Supplies 30/06/09-4,000 20,000 Indirect Lab 10,000 Insurance ( 4,000 + 13,000 6,000 ) 11,000 Power Factory 12,000 Depreciation * 16,000 Rent Factory 15,000 General Factory 18,000 102,000 Current Cost of Goods Manufactured 412,000 Plus Opening Balance of W.I.P. 35,000 447,000 Less Closing Balance of W.I.P. - 47,000 Cost of Goods Manufactured 400,000 Trading Statement for the Month June 2009 Sales 900,000 Cost of Goods Sold Finished Goods 01/06/09 100,000 Purchases 50,000 Cost of Goods Manufactured 400,000 550,000 Finished Goods 30/06/09-50,000 500,000 Gross Profit 400,000 Note: Factory plant and machinery is depreciated at 20% p.a. straight-line. Balance 01 June 2009 960,000 0ne Month 80,000 20% 12 = 16,000 21
Management Accounting in Australia - Solutions 20. Manufacturing Statement for the six months ended 30 th June, 2009 Material Inventory 01/01/09 30,000 Purchases 120,000 Cartage and Duty 10,000 160,000 Material Inventory 30/06/09-10,000 150,000 Paid & Accrued ( 108,500 + 1,500 ) 110,000 110,000 Factory Supplies 01/01/09 3,000 Purchases 12,000 15,000 Factory Supplies 30/06/09-2,000 13,000 Indirect Labour ( 40,500 + 500 ) 41,000 Electricity 16,000 Rates ( 6,200-200 ) 6,000 General 4,000 Depreciation 15,000 95,000 355,000 Work In Progress 01/01/09 44,000 399,000 Work In Progress 30/06/09-39,000 Cost of Goods Manufactured 360,000 Trading Statement for the six month June 2009 Sales 600,000 Cost of Goods Sold Opening Bal Finished Goods 70,000 Purchases 30,000 Cost of Goods Manufactured 360,000 460,000 Closing Bal Finished Goods -20,000 440,000 Gross Profit 160,000 22
21. ( a ) Kangan Manufacturing Statement $ $ $ Opening stock 21,000 Cartage Inwards 4,800 Purchases 96,800 122,600 Less: Closing stock - 21,480 101,120 Direct labour ( 76,950 + 2,000 ) 78,950 78,950 Factory Supplies Inventory 1 July 1,900 Purchases 11,980 13,880 Less Inventory 30 June 2,360 11,520 Indirect Labour ( 32,340 + 1,060 ) 33,400 Rent ( 22,000 x 50% ) 11,000 Rates & Insurance ( 50% x ( 4,100 + 680 940 ) 1,920 Sundry 6,070 Depreciation ( 59,000 x 15% ) 8,850 72,760 252,830 Opening Bal Work In Progress 21,710 274,540 Less Closing Bal Work In Progress - 24,540 Cost of Goods Manufactured $ 250,000 ( b ) Trading Statement $ $ Sales 423,600 Less: Cost of goods sold Opening stock of finished goods 28,320 Cost of Goods Manufactured 250,000 278,320 Less: Closing stock of finished goods 4,720 273,600 Gross Profit $ 150,000 23
Management Accounting in Australia - Solutions 22. ( a ) Brook Vale Manufacturing Statement $ $ $ Opening stock 60,000 Freight Inwards 4,000 Purchases 266,000 330,000 Less: Closing stock - 30,000 300,000 Direct labour ( 123,500 1,000 + 2,500) 125,000 Factory Supplies: Inventory 1 July 12,000 Purchases 38,000 50,000 Less Inventory 30 June 10,000 40,000 Indirect Labour ( Factory Forman ) 49,000 Insurance ( 25% x 4,000 ) + 6,000 7,000 Power 6,000 Depreciation 10,000 112,000 537,000 Opening Bal Work In Progress 35,000 572,000 Less Closing Bal Work In Progress - 20,000 Cost of Goods Manufactured 552,000 ( b ) Trading Statement $ $ Sales 1,140,000 Less: Cost of goods sold Opening stock of finished goods 25,000 Purchases 45,000 Freight Inwards 2,000 Cost of Goods Manufactured 552,000 624,000 Less: Closing stock of finished goods 32,000 592,000 Gross Profit 548,000 24
23. ( a ) Radoslow Ltd Manufacturing Statement $ $ $ Opening Inventory 66,000 Purchases 276,000 Freight inwards 12,000 354,000 Less: Closing Inventory 14,000 340,000 Direct labour ( 159,800 + 1,100 900 ) 160,000 160,000 Factory Supplies Inventory 1 July 12,600 Purchases 32,400 45,000 Less Inventory 30 June 12,700 32,300 Indirect Labour 43,340 Insurance ( 3,960 + 3,000 [ 3,960 x 10/12 ] ) 3,660 Power 5,200 Depreciation 10,500 95,000 595,000 Work In Progress 01/07/2008 15,000 610,000 Work In Progress 30/06/2009-10,000 Cost of Production 600,000 ( b ) Trading Statement $ $ Sales 900,000 Less: Cost of Goods Sold Opening Stock of Finished Goods 24,000 Cost of Goods Manufactured 600,000 Purchases 46,700 Freight 2,300 673,000 Less: Closing stock of finished goods 23,000 650,000 Gross Profit 250,000 25
Management Accounting in Australia - Solutions 24. ( a ) Lone Pine Ltd Manufacturing Statement for Year Ended 30 June 2009 DIRECT MATERIALS Inventory 1 July 2008 $ 25,000 Purchases 170,000 Freight inwards 5,000 200,000 Less: Inventory 30 June 2009 20,000 180,000 DIRECT LABOUR incurred ( $119,200 + 800 ) 120,000 120,000 FACTORY OVERHEAD Factory Supplies Inventory 1 July 2008 2,500 Purchases 17,500 20,000 Less: Inventory 30 June 2009 3,000 17,000 Indirect Labour 23,500 Factory Repairs and Maintenance 6,500 Factory Power ( $9,500 + 500 ) 10,000 Factory Waste disposal 3,300 Factory Insurance 4,500 Depreciation Factory building & machinery 15,300 80,100 380,100 Work In Progress 01/07/08 19,900 400,000 Work In Progress 30/06/09 10,000 Cost of Goods Manufactured 390,000 ( b ) Lone Pine Ltd Trading Statement for Year Ended 30 June 2009 Sales 800,000 Less Cost of Goods Sold Finished Goods Inventory 1 July 2008 33,400 Purchases 40,600 Freight Inwards 4,000 Cost of Goods Manufactured 390,000 468,000 Less Finished Goods Inventory 30 June 2009 18,000 450,000 Gross Profit $350,000 26
25. ( a ) Ad Ler Ltd Manufacturing Statement for Year Ended 30 June 2009 DIRECT MATERIALS Work in Process 1 July 2008 $ 3,100 Inventory 1 July 2008 25,500 Purchases 173,970 Freight inwards 4,540 207,110 Work in Process 30 June 2009 5,300 Less: Inventory 30 June 2009 28,720 34,020 173,090 DIRECT LABOUR Work in Process 1 July 2008 1,030 Direct labour incurred ( $69,160 + 800 ) 69,960 70,990 Work in Process 30 June 2009 1, 720 69,270 PRIME COST 242,360 FACTORY OVERHEAD Work in Process 1 July 2008 1,100 Indirect materials used: Inventory 1 July 2008 2,240 Purchases 14,840 17,080 Less: Inventory 30 June 2009 2,660 14,420 Indirect labour 20, 350 Factory repairs and maintenance 7, 650 Factory power ($8,540 + 1,400) 9,940 Factory waste disposal 2,280 Factory insurance ($4,680 x 3/12) + 3,330 4,500 Depreciation factory building & machinery 15,200 74,340 Less: Work in process 30 June 2009 1,800 72,540 COST of PRODUCTION 314,900 ( b ) Ad Ler Ltd Trading Statement for Year Ended 30 June 2009 Sales 719,600 Less Cost of Goods Sold Finished Goods Inventory 1 July 2008 44,940 Purchases 39,900 Freight inwards 4,060 Cost of Production 314,900 403,800 Less Finished Goods Inventory 30 June 2009 35,300 368,500 Gross Profit 351,100 27