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MOSES MANUFACTURERS The following information relates to Moses Manufacturers, a small business that manufactures photo frames - NSC Accounting - Question 5 - 2017 - Paper 1
Question 5
MOSES MANUFACTURERS The following information relates to Moses Manufacturers, a small business that manufactures photo frames. The financial year ended on 30 April 2... show full transcript
Worked Solution & Example Answer:MOSES MANUFACTURERS The following information relates to Moses Manufacturers, a small business that manufactures photo frames - NSC Accounting - Question 5 - 2017 - Paper 1
Step 1
Prepare the Production Cost Statement for the year ended 30 April 2016
Answer
To prepare the Production Cost Statement, we need to calculate the various components as follows:
-
Direct Material Cost:
- Starting with the purchases of raw materials: R555 000
- Subtract defective materials returned: R21 000
Direct Material Cost = R555 000 - R21 000 = R534 000
-
Prime Cost:
- Direct Labour Cost: R716 960
Prime Cost = Direct Material + Direct Labour = R534 000 + R716 960 = R1 250 960
-
Factory Overhead Cost:
- Given: R468 450
Total Manufacturing Cost = Prime Cost + Factory Overhead = R1 250 960 + R468 450 = R1 719 410
-
Cost of Production of Finished Goods:
- Number of Units Produced: 39,000
- Cost per Unit: R45
Cost of Production = 39,000 units x R45 = R1 755 000
Step 2
Complete the abridged (shortened) Income Statement to calculate the net profit for the year ended 30 April 2016
Answer
To complete the Income Statement, we will proceed with the following calculations:
-
Gross Profit:
- Given Gross Profit = R1 250 000
-
Expenses:
- Selling and Distribution Cost: R609 850
- Administration Cost: R443 950
Total Expenses = Selling and Distribution Cost + Administration Cost = R609 850 + R443 950 = R1 053 800
-
Net Profit:
- Net Profit is calculated as:
Net Profit = Gross Profit - Total Expenses
Net Profit = R1 250 000 - R1 053 800 = R196 200