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Question solutions
Learning Unit 6
Accounting for a manufacturing enterprise
Question 6.1
General ledger of Tatterson’s Designer Products
(Extract only)
Direct material B#
Date Details Fol. Amount Date Details Fol. Amount
20.8 20.9
Mar. 1 Balance b/d 134 850 00 Feb. 28 Work-in-process GJ# 205 350 00
31 Bank CPJ# 176 350 00 Balance c/d 125 000 00
Petty cash PCJ# 19 150 00
330 350 00 330 350 00
20.9
Mar. 1 Balance b/d 125 000 00
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Direct labour C#
Date Details Fol. Amount Date Details Fol. Amount
20.9 20.9
Feb. 28 Creditors for wages GJ# 89 130 00 Feb. 28 Work-in-process GJ# 89 130 00
Manufacturing overheads C#
Date Details Fol. Amount Date Details Fol. Amount
20.9 20.9
Feb. 28 Indirect labour GJ# 35 000 00 Feb. 28 Work-in-process GJ# 276 140 00
Indirect material GJ# 27 040 00
Maintenance: factory GJ# 13 600 00
Sundry manuf. o/h GJ# 16 300 00
Electricity GJ# * 72 000 00
Depreciation GJ# 81 200 00
Rent expense GJ# ** 31 000 00
276 140 00 276 140 00
* R 120 000 x 60 % = R 72 000
** R 62 000 x 50 % = R 31 000
Work-in-process B#
Date Details Fol. Amount Date Details Fol. Amount
20.8 20.9
Mar. 1 Balance b/d 142 700 00 Feb. 28 Finished goods GJ# 550 120 00
20.9 Balance c/d 163 200 00
Feb. 28 Direct material GJ# 205 350 00
Direct labour GJ# 89 130 00
Manufacturing overheads GJ# 276 140 00
713 320 00 713 320 00
20.9
Mar. 1 Balance b/d 163 200 00
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Finished goods B#
Date Details Fol. Amount Date Details Fol. Amount,
20.8 20.9
Mar. 1 Balance b/d 170 000 00 Feb. 28 Cost of sales GJ# 525 120 00
20.9 Balance c/d 195 000 00
Feb. 28 Work-in-process GJ# 550 120 00
720 120 00 720 120 00
20.9
Mar. 1 Balance b/d 195 000 00
Question 6.2
General ledger of Balesteros International
(Extract only)
Direct material B#
Date Details Fol. Amount Date Details Fol. Amount
20.8 20.9
Oct. 1 Balance b/d 42 816 00 Sep. 30 Work-in-process GJ# * 79 500 00
20.9 Balance c/d 54 030 00
Sep. 30 Creditors control CJ# 79 425 00
Creditors control CJ# 11 289 00
133 530 00 133 530 00
20.9
Oct 1 Balance b/d 54 030 00
* R 79 500 constitutes the raw materials issued to the factory.
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Work-in-process B#
Date Details Fol. Amount Date Details Fol. Amount
20.8 20.9
Oct. 1 Balance b/d 11 928 00 Sep. 30 Finished goods GJ# 270 036 00
20.9 Balance c/d 18 363 00
Sep. 30 Direct material GJ# 79 500 00
Direct labour GJ# 66 300 00
Manufacturing overheads GJ# 130 671 00
288 399 00 288 399 00
20.9
Oct. 1 Balance b/d 18 363 00
Finished goods B#
Date Details Fol. Amount Date Details Fol. Amount,
20.8 20.9
Oct. 1 Balance b/d 74 475 00 Sep. 30 Cost of sales GJ# 321 900 00
20.9 Balance c/d 22 611 00
Sep. 30 Work-in-process GJ# 270 036 00
344 511 00 344 511 00
20.9
Oct. 1 Balance b/d 22 611 00
Indirect material B#
Date Details Fol. Amount Date Details Fol. Amount,
20.8 20.9
Oct. 1 Balance b/d 3 579 00 Sep. 30 Manufacturing overheads GJ# 10 560 00
20.9 Balance c/d 2 379 00
Sep. 30 Bank CBP# 9 360 00
12 939 00 12 939 00
20.9
Oct. 1 Balance b/d 2 379 00
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Manufacturing overheads C#
Date Details Fol. Amount Date Details Fol. Amount
20.9 20.9
Sep. 30 Indirect labour GJ# 29 340 00 Sep. 30 Work-in-process GJ# 130 671 00
Electricity GJ# 17 100 00
Maintenance GJ# 12 027 00
Insurance GJ# 15 390 00
Indirect materials GJ# 10 560 00
Rent expense GJ# 30 000 00
Depreciation GJ# 16 254 00
130 671 00 130 671 00
Cost of sales N#
Date Details Fol. Amount Date Details Fol. Amount
20.9 20.9
Sep. 30 Finished goods GJ# 321 900 00 Sep. 30 Trading account GJ# 321 900 00
Trading account F1
Date Details Fol. Amount Date Details Fol. Amount
20.9 20.9
Sep. 30 Cost of sales GJ# 321 900 00 Sep. 30 Sales (631 800 – 31 800) GJ# 600 000 00
Profit and loss GJ# 278 100 00
600 000 00 600 000 00
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Profit and loss F2
Date Details Fol. Amount Date Details Fol. Amount
20.9 20.9
Apr. 30 Electricity GJ# 14 433 00 Apr. 30 Trading account GJ# 278 100 00
Maintenance GJ# 11 154 00
Insurance GJ# 6 900 00
Distribution costs GJ# 5 637 00
Advertising GJ# 11 775 00
Salaries GJ# 56 271 00
Rent expense GJ# 15 000 00
Capital (net profit) GJ# 156 930 00
278 100 00 278 100 00
Question 6.3
General ledger of Fetherline Manufacturers
Direct material B#
Date Details Fol. Amount Date Details Fol. Amount
20.3 20.4
May 1 Balance b/d 8 644 00 Apr. 30 Work-in-process (x) GJ# 52 222 00
20.4
Apr. 30 Creditors control CJ# 42 936 00 Balance c/d 6 298 00
Creditors control CJ# 6 940 00
58 520 00 58 520 00
20.4
May 1 Balance b/d 6 298 00
Only expenses relating to the administrative side of
the business are closed off against profit and loss.
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Direct labour C#
Date Details Fol. Amount Date Details Fol. Amount
20.4 20.4
Apr. 30 Creditors for wages GJ# 51 560 00 Apr. 30 Work-in-process GJ# 75 668 00
Pension fund contributions GJ# 9 644 00
Medical aid contributions GJ# 13 948 00
UIF contributions GJ# 516 00
75 668 00 75 668 00
Work-in-process B#
Date Details Fol. Amount Date Details Fol. Amount
20.3 20.4
May 1 Balance b/d 2 054 00 Apr. 30 Finished goods GJ# 209 986 00
20.4 Balance c/d 26 556 00
Apr. 30 Direct material GJ# 52 222 00
Direct labour GJ# 75 668 00
Factory overhead costs GJ# 106 598 00
236 542 00 236 542 00
20.4
May 1 Balance b/d 26 556 00
Finished goods B#
Date Details Fol. Amount Date Details Fol. Amount
20.3 20.4
May 1 Balance b/d 10 462 00 Apr. 30 Cost of sales GJ# 189 050 00
20.4 Balance c/d 31 398 00
Apr. 30 Work-in-process CJ# 209 986 00
220 448 00 220 398 00
20.4
May 1 Balance b/d 31 398 00
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Indirect material B#
Date Details Fol. Amount Date Details Fol. Amount
20.3 20.4
May 1 Balance b/d 2 580 00 Apr. 30 Factory overheads GJ# 9 000 00
20.4 Balance c/d 4 444 00
Apr. 30 Creditors control CJ# 10 864 00
13 444 00 13 444 00
20.4
May 1 Balance b/d 4 444 00
Factory overhead costs C#
Date Details Fol. Amount Date Details Fol. Amount
20.4 20.4
Apr. 30 Indirect labour GJ# 28 778 00 Apr. 30 Work-in-process GJ# 106 598 00
Indirect material GJ# 9 000 00
Electricity GJ# 26 672 00
Telephone GJ# 3 708 00
Insurance GJ# 17 560 00
Rent expense GJ# 14 000 00
Depreciation GJ# 6 880 00
106 598 00 106 598 00
Cost of sales N#
Date Details Fol. Amount Date Details Fol. Amount
20.4 20.4
Apr. 30 Finished goods GJ# 189 050 00 Apr. 30 Trading account GJ# 189 050 00
Trading account F1
Date Details Fol. Amount Date Details Fol. Amount
20.4 20.4
Apr. 30 Cost of sales GJ# 189 050 00 Apr. 30 Sales (696 480 – 4 000) GJ# 692 480 00
Profit and loss GJ# 503 430 00
692 480 00 692 480 00
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Profit and loss F2
Date Details Fol. Amount Date Details Fol. Amount
20.4 20.4
Apr. 30 Electricity GJ# 15 106 00 Apr. 30 Trading account GJ# 503 430 00
Telephone GJ# 9 422 00
Insurance GJ# 4 700 00
Rent expense GJ# 8 000 00
Selling & admin. costs GJ# 42 440 00
Stationery GJ# 2 554 00
Salaries GJ# 49 424 00
Capital (net profit) GJ# 371 784 00
503 430 00 503 430 00
Question 6.4
The reason is that some of the materials, labour and overhead costs incurred during the period relate to
goods that have not yet been completed. The costs that relate to the goods that are not yet completed
are shown in the work-in-process inventory figures shown at the bottom of the production cost
statement. The opening work-in-process inventory must be added to the manufacturing costs for the
period, and the closing work-in-process must be deducted, to arrive at the cost of goods manufactured.
The logic underlying the production cost statement is laid out in the illustration that follows. To calculate
the cost of goods sold, start at the top of the schedule and work your way down using the following
steps:
Step: 1. Calculate the raw materials used in production in the top section of the illustration.
2. Insert the total raw materials used in production in the second section of the illustration, and
calculate the total manufacturing cost.
3. Insert the total manufacturing cost into the third section of the illustration, and calculate the cost of
goods manufactured.
4. Insert the cost of goods manufactured into the bottom section of the illustration, and calculate the
cost of goods sold.
Only expenses relating to the administrative side of
the business are closed off against profit and loss
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The schedule appears below:
Amount (R)
Calculation of raw materials used in production:
Opening raw materials inventory XXX
Add: Purchases of raw materials during the period XXX
Less: Closing raw materials inventory (XXX)
Raw materials used in production A
Calculation of total manufacturing costs:
Raw materials used in production A
Add: Direct labour XXX
Add: Total manufacturing overhead costs XXX
Total manufacturing cost B
Calculation of cost of goods manufactured:
Opening work-in-process inventory XXX
Add: Total manufacturing cost B
Less: Closing work-in-process inventory (XXX)
Cost of goods manufactured C
Calculation of cost of goods sold:
Opening finished goods inventory XXX
Add: Cost of goods manufactured C
Less: Closing finished goods inventory XXX
Cost of goods sold XXX
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Question 6.5
Ubuntu Manufacturers
Production cost statement for the year ended 31 March 20.7
Notes R
Direct costs 252 876
Direct material costs 1 169 926
Direct labour costs 2 82 950
Factory overhead costs 3 235 881
Total manufacturing costs 488 757
Plus: Opening Work-in-process (1 April 20.6) 18 051
Less: Closing Work-in-process (31 March 20.7) (8 901)
Cost of production of finished goods 497 907
Trading statement for the year ended 31 March 20.7
Notes R
Sales 739 200
Cost of finished goods sold 4 (493 626)
Gross profit 245 574
Notes the financial statements 1. Direct material costs
Opening inventory 22 683
Net purchases 150 000
Freight on raw material purchases 13 530
Customs duties -
186 213
Closing inventory (16 287)
Direct material cost 169 926
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2. Direct labour costs
Factory wages 60 000
Pension fund contributions by employer 10 380
Medical aid contributions by employer 11 970
UIF contributions by employer 600
Direct labour cost 82 950
3. Factory overhead costs
Indirect material 18 000
Indirect labour 45 042
Rent paid (96 000 x 9/12) 72 000
Water and electricity 30 954
Depreciation 43 200
Insurance (35 580 x 9/12) 26 685
235 881
4. Cost of finished goods sold
Opening stock of finished goods (1 April 20.6) 13 980
Plus: Cost of finished goods produced during the year 497 907
Less: Closing stock of finished goods (31 March 20.7) 18 261
493 626
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Question 6.6 Leningrad Manufacturers
Production cost statement for the year ended 31 August 20.8
Notes R
Direct costs 377 650
Direct material costs 1 277 650
Direct labour costs 2 100 000
Factory overhead costs 3 446 600
Total manufacturing costs 824 250
Plus: Opening Work-in-process (1 September 20.7) 9 350
Less: Closing Work-in-process (31 August 20.8) (27 000)
Cost of production of finished goods 806 600
Trading statement for the year ended 31 August 20.8
Notes R
Sales 955 000
Cost of finished goods sold 4 (804 850)
Gross profit 150 150
Notes the financial statements 1. Direct material costs
Opening inventory 35 700
Net purchases 228 150
Import tariffs on direct material purchases 22 400
Customs duties -
286 250
Closing inventory (8 600)
Direct material cost 277 650
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2. Direct labour costs
Factory wages 70 000
Pension fund contributions by employer 15 600
Medical aid contributions by employer 13 700
UIF contributions by employer 700
Direct labour cost 100 000
3. Factory overhead costs
Indirect material (10 000 + 44 000 – 6 550) 47 450
Indirect labour 59 850
Depreciation 21 000
Insurance 10 050
Water and electricity 57 750
Repairs and maintenance 13 000
Salaries 125 000
Rent paid 112 500
446 600
4. Cost of finished goods sold
Opening stock of finished goods (1 September 20.7) 15 250
Plus: Cost of finished goods produced during the year 806 600
Less: Closing stock of finished goods (31 August 20.8) (17 000)
804 850
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Question 6.7
Jaypeg Industrial Ltd.
Production cost statement for the month ended 31 August 20.5
Notes R
Direct costs 475 380
Direct material costs 1 242 140
Direct labour costs 2 233 240
Factory overhead costs 3 454 830
Total manufacturing costs 930 210
Plus: Opening Work-in-process (1 August 20.5) 31 230
Less: Closing Work-in-process (31 August 20.5) (52 300)
Cost of production of finished goods 909 140
Trading statement for the month ended 31 August 20.5
Sales 1 884 350
Cost of finished goods sold 4 (887 600)
Gross profit 996 750
Notes the financial statements 1. Direct material costs
Opening inventory 131 230
Net purchases 252 130
Railage on direct material purchases 24 320
Customs duties -
407 680
Closing inventory (165 540)
Direct material cost (* given) 242 140
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2. Direct labour costs
Factory wages 233 240
Pension fund contributions by employer -
Medical aid contributions by employer -
UIF contributions by employer -
Direct labour cost 233 240
3. Factory overhead costs
Indirect material (given) 42 000
Indirect labour 81 230
Depreciation 75 000
Insurance 52 130
Electricity 63 240
Maintenance 41 230
Rent paid 100 000
454 830
4. Cost of finished goods sold
Opening stock of finished goods (1 August 20.5) 32 130
Plus: Cost of finished goods produced during the year 909 140
Less: Closing stock of finished goods (31 August 20.5) (53 670)
(* Given) 887 600
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Question 6.8
Iconic Products Ltd
(i)
Production cost statement for the month ended 28 February 20.9
Notes R
Direct costs 230 070
Direct material costs 1 70 920
Direct labour costs 2 159 150
Factory overhead costs 3 200 550
Total manufacturing costs 430 620
Plus: Opening Work-in-process (1 March 20.8) 46 500
Less: Closing Work-in-process (28 February 20.9) (63 270)
Cost of production of finished goods 413 850
(ii)
Trading statement for the month ended 28 February 20.9
Notes R
Sales 737 100
Cost of finished goods sold 4 (391 239)
Gross profit 345 861
(iii)
Notes the financial statements 1. Direct material costs
Opening stock 36 000
Net purchases (85 005 – 2 625) 82 380
Import duty on direct material purchases 10 920
Customs duties -
129 300
Closing stock (58 380)
Direct material cost (* given) 70 920
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2. Direct labour costs
Factory wages [(178 500 x 90%) – 1 500] 159 150
Pension fund contributions by employer -
Medical aid contributions by employer -
UIF contributions by employer -
Direct labour cost 159 150
3. Factory overhead costs
Indirect labour [(178 500 x 10%) + 12 600 + 9 300] 39 750
General expenses: factory 2 400
Repairs and maintenance: factory 5 100
Insurance (18 000 x 2/3) 12 000
Water and electricity (36 000 x 75%] 27 000
Depreciation: factory equipment (690 000 x 15%) 103 500
Rent expense (9 600 x 75%) 10 800
200 550
4. Cost of finished goods sold
Opening stock of finished goods (1 March 20.8) 137 040
Plus: Cost of finished goods produced during the year 413 850
Less: Closing stock of finished goods (28 February 20.9) (159 651)
391 239