TUTORIAL ACD10403 : MANUFACTURING ACCOUNTS

Question 1 : True/False Questions

1 The sum of all costs of manufacturing costs except direct materials is called TRUE / FALSE
manufacturing overhead.

2 Conversion cost is the sum of direct labor and manufacturing overhead. TRUE / FALSE

Prime cost is the sum of direct labor and manufacturing overhead. TRUE / FALSE

3 Thread used in the production of mattresses, an indirect material, is TRUE / FALSE

classified as manufacturing overhead.

Period costs are also known as inventoriable costs. TRUE / FALSE

4 The cost of goods sold of a manufacturing company equals beginning TRUE / FALSE
finished goods inventory + cost of goods manufactured - ending finished
goods inventory.

5 A variable cost is constant if expressed on a per unit basis but the total TRUE / FALSE
dollar amount changes as the number of units increases or decreases.

6 The cost of the cushions that are used to manufacture sofas is best TRUE / FALSE
described as a variable cost

7 Inventoriable (i.e., product) costs that have become expenses can be found TRUE / FALSE
a cost of goods sold.
8 Product costs appear on financial statements only when products are sold. TRUE / FALSE

9 The factory manager's salary would be classified as an indirect cost of TRUE / FALSE
producing one unit of product.

10 Monthly depreciation of production equipment is an example of a period TRUE / FALSE

cost

11 Costs that cannot be traced to a specific cost object, or that are not worth TRUE / FALSE
the effort of tracing, are indirect costs, such as the cost of rent on the factory

12 TRUE / FALSE
When you incur a cost, you give up one thing, such as money or time, in
exchange for something else. Cost is the value of what is given up during
this exchange
Question 2

Beauty Gift Berhad manufactures custom table tops. For each cost listed below, place an "X"
in all of the appropriate categories.

Product Costs
Direct Direct Mfg. Prime Conversion Period
Material Labor Overhead Cost Cost Cost
Advertising expenses x
Depreciation on production x x
equipment
Direct material purchased x x
Factory insurance x x
Factory rent x x
Indirect production labor x x
Production supervisor salary x x
Production wages x x x
Sales commissions x
Sales manager salary x
Utilities for factory x x
Question 3

Sepadu Industries reported the following data for the month of June 2020:

Inventories: Beginning(RM) Ending(RM)

Raw materials 39,000 32,000
Work in process 24,000 23,000
Finished goods 28,000 30,000

Additional information:

Sales RM 250,000
Raw materials purchases RM 50,000
Direct labor cost RM 44,000
Manufacturing overhead cost RM 71,000
Selling expense RM 21,000
Administrative expense RM 27,000

Required:

a) Calculate total manufacturing cost for June 2020

Raw mat used + Direct labor + MOH

= 57,000 + 44,000 + 71,000 = 172,000

Raw mat used = beg bal raw mat + purchased raw mat - end raw mat
= 39,000 + 50,000 - 32,000 = 57,000

b) Calculate the net operating income for June 2020

Compute COGM
= Total Manufacturing cost 172,000
Beg WIP 24,000
 End WIP (23,000)
COGM 173,000

Sale 250,000

(-) COGS:
Beg FG 28,000
COGM 173,000
(-) end FG (30,000)
COGS 171,000

Gross profit 79,000

Expenses :

Selling expense RM 21,000

Administrative expense RM 27,000
Net income 31,000

QUESTION 4

Kenanga Sdn. Bhd., a manufacturer of ceramic pottery, has provided the following list of
balance as at 31 December 2020:

(RM)
Inventory as at 1 January 2020:
Raw material 9,500
Work in process 5,000
Finished goods 10,400
Purchases : Raw material - COGM 35,750
Hire of special grilling machine – COGM 1,500
Direct wages 16,000
Indirect materials 2,500
Carriage inwards 1,000
Return inwards 700
Plant & machinery (at cost) 30,000
Lorry (at cost) 28,500
Factory fuel 1,500
Indirect wages 7,000
 Salesmen’s salary 6,000
Bad debts expenses 400
Advertising 1,600
Insurance 300
Electricity and telephone 350
Sales 160,000

Additional information:
1. Inventory as at 31 December 2020:

Raw materials RM 8,500

Work in process 3,500
Finished goods 10,050
2.
 2. Accrued expenses as at 31 December 2020:
Direct wages RM600
Indirect wages RM450

3. Insurance prepaid is amount RM90.

4. Depreciation is at 10% per annum on cost for both plant & machinery and lorry.

5. The allocation of expenses is as follows;

Factory Admin/selling
Insurance 3/5 2/5
Electricity & telephone 75 % 25 %
Depreciation for lorry 60 % 40 %

REQUIRED:

a) Prepare Statement of Cost of Goods Manufactured for the year ended 31 December
2020.

b) Prepare Statement of Profit or Loss Accounts for the year ended 31 December 2020.

Kenanga sdn.bhd
Statement cost of goods manufactured
For the year ended 31 december 2020

Raw material used :

Beg bal raw mat 9,500
+ raw material purchased 35,750
+ carriage inwards 1,000
(-) end bal raw material (8,500)
Cost of raw material used 37,750
Direct labor (16,000 + 600) 16,600
Prime cost 54,350
MOH:
Hire of special grilling machine 1500
Indirect matrial 2,500
Factory fuel 1500
Indirect wages (7,000 + 450) 7,450
Insurance (300 -90 = 210 x 3/5 = 126 126
Electricity and telephone (350 x 75%) 263
Depr exp plant & mac ( 10% x 30,000) 3,000
Depr exp lorry ( 10% x 28,500 = 2850 x 60%) 1,710
Total MOH 18,049

Total manufacturing cost 72,399

_(+) beg WIP 5,000
(-) end WIP (3,500)

Cost of goods manufactured 73,899

 Kenanga sdn.bhd
Statement Profit and loss ac
For the year ended 31 Dec 2020

sales 160,000
(-) return inwards (700)
Net sales 159,300

COGS:
Beg bal FG 10,400
(+) COGM 73,899
Cost of goods available for sales 84,299
(-) end bal FG (10,050)
COGS 74,249

Gross profir 85,051

Expenses:
Salesman salary 6,000
Bad debt exp 400
advertising 1600
Insurance (300 -90 = 210 x 2/5 = 84 84
Electric and telephone (350 x 25%) 87
Depr exp for lorry (( 10% x 28,500 = 2850 x 40%) 1140
9,311
Net income 75,740
QUESTION 5

The trial balance extracted at 30 April 2010 from the books of Unique Creative, a kitchen
manufacturer, is given below:-

Dr Cr
RM RM
Capital account 23,100
Factory machinery at cost 13,080
Accumulated depreciation- Factory machinery 3,250
Office Equipment 1,200
Accumulated depreciation- Office Equipment 440
Account receivable 6,500
Account payable 5,600
Bank 3,330
Drawings 5,000
Bank Loan 9,000
Carriage inwards – Raw materials 780
Carriage outwards 770
Purchase – raw materials 88,800
Light and heat 3,300
Rent and rates 6,260
Direct factory wages 11,520
Office Wages 5,900
Sales commission to selling agents 1,900
Sales 136,300
Stock 1/5/2009 - Raw materials 6,700
Work in Progress 15,050
Finished goods 7,600

_________ _______
177,690 177,690
======== =======
Additional information:

1. At 30 April 2010, accrued office wages amounted to RM300 and direct factory
wages RM480.

2. At 30 April 2010, rent paid included RM820 on 13 February 2010, for the period 1
February to 31 July 2010.

3. Stock at 30 April 2010 were as follows:-

Raw materials RM3,730

Work In Progress RM8,950
Finished goods RM18,800
 4. Light and heat should be apportioned between the factory and office in the
ratio 4 : 1 respectively; rent and rates in the ratio 3 : 2 respectively .

5. Depreciation should be allowed for factory machinery on the straight line

method over 10 years, and office equipment on the reducing balance method
at 15% per annum.

6. A provision of RM2,000 should be made for doubtful debts.

Required:

a) Prepare a statement cost of goods manufactured and profit or loss statement for the
year ended 30 April 2010.

b) A statement of financial position for Unique Creative as at 30 April 2010.