CHAPTER 28

MANUFACTURING ACCOUNTS

Question 1
ZENUF & CO.
Manufacturing account for the year ended 31 March 2014
$ $
Raw materials consumed
Opening inventory 28 100
Add purchases 164 900
193 000
Less closing inventory (25 600)
167 400
Direct wages 184 800
Prime cost 352 200
Factory overheads
Depreciation of factory machinery 36 500
Insurance 4 700
Maintenance and repairs 2 200
Power 15 300
Supervisor’s wages 44 900
103 600
Cost of production 455 800

Question 2

ARGO & SONS

Manufacturing account for the year ended 31 August 2014
$ $
Raw materials consumed
Opening inventory 54 200
Add purchases 406 000
460 200
Less closing inventory (61 700)
398 500
Direct wages 345 000
Prime cost 743 500
Factory overheads
Insurance 18 700
Fuel charges 32 300
General expenses 7 100
Indirect factory wages and salaries 64 200
Machinery maintenance charges 4 400
Rent of premises 64 800
Depreciation of machinery ($480 000 ×
20%) 96 000
287 500
Cost of production 1 031 000
Question 3
MARCO ENTERPRISES
Manufacturing account for the year ended 31 October 2014
$ $
Raw materials consumed
Opening inventory 17 830
Add purchases 148 600
166 430
Less closing inventory (16 590)
149 840
Direct wages 157 340
Prime cost 307 180
Factory overheads
Electricity charges (5/8ths × $6 640 4 150
Insurance ($4 380 − prepaid $480) 3 900
Manager’s salary ($38 430 + due $560) 38 990
Machinery repairs 3 550
Depreciation of machinery 23 000
73 590
380 770
Add opening work in progress 3 830
384 600
Less closing work in progress (2 750)
Cost of production 381 850

Question 4
CROSSGRAIN LTD
Manufacturing account for the year ended 31 October 2014
$ $
Raw materials consumed
Opening inventory 27 490
Add purchases 211 360
238 850
Less closing inventory (26 120)
212 630
Direct wages 188 750
Prime cost 401 380
Factory overheads
Electricity charges ($4 450 + due $390) 4 840
Indirect wages 32 360
Rent of factory buildings ($15 440 − prepaid $1
080) 14 360
Water charges ($4 640 × 3/4) 3 480
Depreciaton of factory machinery ($88 000 × 25%) 22 000
77 040
478 420
Add opening work in progress 4 450
482 870
Less closing work in progress (4 990)
Cost of production 477 880
Question 5

THE BELFORD MANUFACTURING COMPANY

Income Statement for the year ended 31 December 2014
$ $
Revenue 332 000
Less: opening inventory of finished goods 13 600
cost of production 224 000
237 600
less closing inventory of finished goods (12 500)
Cost of sales (225 100)
Gross profit 106 900
Less expenses
Office wages $23 200 + due $400) 23 600
Selling expenses 11 000
Depreciation of office equipment 1 800
(36 400)
Profit for the year 70 500

Statement of financial position at 31 December 2014

$ $ $
NON-CURRENT ASSETS
Machinery at net book value 66 000
Office equipment at net book value ($14 000 − $1 800) 12 200
78 200
CURRENT ASSETS
Inventories
raw materials 15 700
work in progress 4 800
finished goods 12 500
33 000
Trade receivables 6 400
Cash at bank 3 400
42 800
121 000
CAPITAL
Opening balance 69 900
Add profit for year 70 500
140 400
Less drawings (27 000)
113 400

CURRENT LIABILITIES
Trade payables 7 200
Other payables 400
7 600
121 000
Question 6
HASHMI
Income Statement for the year ended 31 October 2014
$ $
Revenue 563 000
Less: opening inventory of finished goods 38 600
cost of production 385 000
423 600
less closing inventory of finished goods (42 300)
Cost of sales (381 300)
Gross profit 181 700
Less expenses
Administration expenses 14 300
Interest charges 1 100
Selling expenses ($8 400 − prepaid $300) 8 100
Depreciation of office non-current assets 2 200
(25 700)
Profit for the year 156 000

Statement of financial position at 31 October 2014

$ $ $
NON-CURRENT ASSETS
Factory non-current assets at net book value 440 000
Office non-current assets at net book value 14 200
454 200
CURRENT ASSETS
Inventories
raw materials 45 300
work in progress 5 700
finished goods 42 300
93 300
Trade receivables 22 000
Other receivables 300
115 600
569 800
CAPITAL
Opening balance 434 600
Add profit for year 156 000
590 600
Less drawings (41 600)
549 000

CURRENT LIABILITIES
Trade payables 17 900
Bank overdraft 2 900
20 800
569 800
Question 7

PAULA OSBORNE
Manufacturing account for the year ended 31 July 2014
$ $
Raw materials consumed
Opening inventory 12 490
Add purchases 181 220
193 710
Less closing inventory (11 120)
182 590
Direct wages ($147 350 + $1 370 due) 148 720
Prime cost 331 310
Factory overheads
Indirect wages and salaries 31 550
Depreciation of machinery 12 800
General expenses (9/10ths × $72 500) 65 250
109 600
440 910
Add opening work in progress 2 780
443 690
Less closing work in progress (3 280)
Cost of production 440 410

Income Statement for the year ended 31 July 2014

$ $
Revenue 488 230
Less: opening inventory of finished goods 9 380
cost of production 440 410
449 790
less closing inventory of finished goods (7 420)
Cost of sales (442 370)
Gross profit 45 860
Less expenses
Administration expenses 8 200
General expenses (1/10 × $72 500) 7 250
Office salaries 23 880
Depreciation of office equipment 1 240
(40 570)
Profit for the year 5 290
 Statement of financial position at 31 July 2014
$ $ $
NON-CURRENT ASSETS
Machinery at net book value 51 200
Office equipment at net book value 11 160
62 360
CURRENT ASSETS
Inventories
raw materials 11 120
work in progress 3 280
finished goods 7 420
21 820
Trade receivables 8 210
Cash at bank 4 400
34 430
96 790
CAPITAL
Opening balance 113 200
Add profit for year 5 290
118 490
Less drawings (28 240)
90 250

CURRENT LIABILITIES
Trade payables 5 170
Other payables 1 370
6 540
96 790
Question 8

SUMAN’S ENTERPRISES
Manufacturing account for the year ended 31 May 2014
$ $
Raw materials consumed
Opening inventory 36 000
Add purchases 182 370
218 370
Less closing inventory (27 800)
190 570
Direct wages 229 400
Prime cost 419 970
Factory overheads
Other factory expenses ($22 400 + due $540) 22 940
Rent (6/7ths × $28 700) 24 600
Depreciation of factory plant and machinery 66 000
113 540
533 510
Add opening work in progress 4 500
538 010
Less closing work in progress (3 800)
Cost of production 534 210

Income Statement for the year ended 31 May 2014

$ $
Revenue 662 100
Less: opening inventory of finished goods 12 650
cost of production 534 210
546 860
less closing inventory of finished goods (14 810)
Cost of sales 532 050
Gross profit 130 050
Less expenses
Financial charges 1 800
Depreciation of office equipment 2 760
Office running costs ($17 300 − prepaid $390) 16 910
Rent (1/7th × $28 700) 4 100
Selling expenses 7 120
32 690
Profit for the year 97 360
 Statement of financial position at 31 May 2014
$ $ $
NON-CURRENT ASSETS
Plant and machinery at net book value
($330 000 − $198 000) 132 000
Office equipment at net book value 15 640
147 640
CURRENT ASSETS
Inventories
raw materials 27 800
work in progress 3 800
finished goods 14 810
46 410
Trade receivables 11 290
Other receivables 390
58 090
205 730
CAPITAL
Opening balance 125 500
Add profit for year 97 360
222 860
Less drawings 34 500
188 360

CURRENT LIABILITIES
Trade payables 14 340
Other payables 540
Bank overdraft 2 490
17 370
205 730

EXAM STYLE QUESTIONS

Q Ans Q Ans Q Ans Q Ans Q Ans

9 B 10 B 11 D 12 B 13 D

Question 14

(a) Manufacturing accounts are prepared in order to calculate the cost of

producing finished goods. This figure is required when preparing a
manufacturer’s income statement because it replaces ‘purchases’ when
calculating the gross profit.
(b) WHIZZO PRODUCTS
Manufacturing account for the year ended 31 August 2014
$ $
Raw materials consumed
Opening inventory 37 800
Add purchases 92 500
130 300
Less closing inventory (42 900)
87 400
Direct factory wages ($75 600 + due
$2 400) 78 000
Prime cost 165 400
Factory overheads
Running costs 27 300
Supervisor’s salary 32 400
Depreciation of plant and machinery
(20% × $270 000) 54 000
113 700
279 100
Add: opening work in progress 5 250
284 350
Less: closing work in progress (4 790)
Cost of production 279 560

(c) Calculation of gross profit

$ $
Revenue 440 000
Less: cost of sales of finished goods
Opening inventory 39 600
Add cost of production 279 560
319 160
Less closing inventory (32 700)
(286 460)
Gross profit 153 540