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Cost Accounting Activity 5

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40 views7 pages

Cost Accounting Activity 5

Uploaded by

Minenhle
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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INANDA NEWTOWN COMPREHENSIVE HIGH SCHOOL
ACCOUNTING CLASS GRADE 12

MANUFACTURING

SHORT FORM INCOME STATEMENT

Name of the manufacurer _________________________

Income Statement for the period ended _______________

Sales xxx

Less: Cost of Sales (cost of finished goods sold) 6 (xxx)

Gross Profit xxx

Less: Other Costs xxx)

Selling and Distribution Costs 4 (xxx)

Administration Costs 5 (xxx)

Net Profit xxx

This is a shorter form of the Income Statement than what


learners are used to.

Under expenses we do not list all the expenses but rather


group them into Selling & Distribution Costs and
Administration Costs.

77 Accounting Grade 12 - CAPS 1


4 Selling and Distribution Costs

Sales commission xxx

Rent: Sales department xxx

Depreciation on sales vehicles xxx

Sales vehicles expenses xxx

Bad debts xxx

Selling & Distribution Costs xxx

5 Administration Costs

Salaries and wages xxx

Rent: Office xxx

Depreciation on office equipment xxx

Interest on loans xxx

Insurance xxx

Sundry expenses xxx

Administration Costs xxx

Selling & Distribution (marketing) and the Administration cost


accounts are similar to the Factory Overhead Cost. This
summarises all the individual costs relating to these
departments

77 Accounting Grade 12 - CAPS 2


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6 Finished Goods (Costs of Sales calculations)

Opening Stock of finished goods xxx

Cost of finished goods produced during the year xxx

xxx

Closing stock of finished goods (xxx)

Cost of finished goods sold (Cost of Sales) xxx

Finished Goods stock account is the completion of the


production process. This account will indicate the
following:

• Goods made last year but not sold (plus)

• All goods that were made in the current year

= Amount of goods available to be sold.

This figure should be compared to the amount of


physical stock taking, to determine the
Cost of Sales

77 Accounting Grade 12 - CAPS 3


ACTIVITY 11 FINANCIAL STATEMENTS OF
MANUFACTURING ENTERPRISE

REQUIRED
Use the information on Noel Manufacturers to prepare the following for the year ended
30 August 2014:
• Production Cost Statement
• Income Statement
• All relevant notes in order to show workings

INFORMATION

Extract from the Balance Sheet on 1 September 2013


Raw Material stock 180 000
work-in-progress account 80 000
Finished goods on hand 70 000
Consumable stores on hand 14 000
Factory equipment 1 000 000
Accumulated depreciation on factory 240 000
equipment

Closing balances on 30 August 2014


Raw material stock 64 000
Work-in-progress account ?
Finished goods on hand 80 000
Consumable stores on hand 6 000

Transactions for the year:


Raw material (credit purchases) 600 000
Raw material (cash purchases) 460 000
Carriage on raw material (incurred on credit) 150 000
Raw material (factory) returned to creditors 24 000
Consumable stores (factory) cash purchases 44 000
Salaries and wages paid (R180 000 of this was for direct labour)
(R80 000 was administration expenses) 360 000
(the balance was indirect labour costs)

77 Accounting Grade 12 - CAPS 4


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Additional transactions for the year:

• Depreciation on factory equipment must be written off at 12% p.a. on diminishing


balance method.
• Depreciation on office equipment amounts to R2 500 and R11 000 sales vehicles.
• Rent amounting to RR500 000 was paid during the year. The factory uses 60% of the
floor space, while the office uses 15% and the sales department the rest.
• Other expenses were:
• Electricity, R344 000 (factory used R320 000, the office R10 000 and the
sales department the rest)
• Sales vehicles running costs, R72 000
• Sundry expenses R90 000, (these are split in the ratio 4:1:1 between the
factory, office and sales departments respectively.
• Sales amounted to R3 600. Commission paid to salespersons is 5%

ANSWER

PRODUCTION COST STATEMENT FOR THE YEAR ENDING 30 AUGUST 2014

Note Amount

Prime Cost

Total manufacturing costs

Cost of production of finished goods

Income Statement for the year ending 30 August 2014


Sales
Cost of Finished Goods

Less: other costs

Net Profit/Loss

77 Accounting Grade 12 - CAPS 5


Notes to the Financial Statements
1. Direct Material Cost
Raw material opening stock balance

Less:Raw material - closing stock balance


Direct Material Cost

2. Direct Labour Cost

Direct Labour Costs

3. Factory Overheads

Factory Overheads

4. Selling and Distribution Costs

Selling and Distribution Costs

5. Administration Costs

Administration Costs

6. Cost of finished goods sold

Cost of Finished Goods sold ( cost of sales)

77 Accounting Grade 12 - CAPS 6


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77 Accounting Grade 12 - CAPS 7

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