Question

1.

Khorab Ltd manufactures chocolate candy. The company's management accounts are drawn up on a monthly basis as per the financial manager's (FM) recommendation. Ms Nghitewa, who is the company;s FM provided the following information in respect of January 2019:

$

Purchases(direct and indirect material) 460 000

Office salaries 45 000

freight on sale 1 2 000

Rent 30 000

Freight on purchases 8 000

Property rates and taxes 55 000

Insurance 20 000

Depreciation 55 000

Balances on 1 January 2019:

Raw material 35 000

Work-in-progress 106 000

Finished goods ( 7000 kg) 136 500

Balances on 31 January 2019:

Raw materials 42 000

Work-in-progress 90 000

Finished goods (2000 kg) 40 400

Additional information

1. The payroll of the factory workers for January 20019 is as follows:

		Overtime				Deductions
	Normal	Basic	Premium	leave payment	Gross wages	Pension	PAYE	Medical
Manufacturing	200 000	80 000	40 000	7 000	327 000	16 000	25 000	8 000
Supervisors	40 000	10 000	5 0000	-	55 000	3 000	4 700	1 500
Cleaners	9 000	2 0000	1 000	-	12 000	1 000	1 500	500

Manufacturing staff are paid at $ 40 per hour. Overtime is paid at 1.5 times the normal rate. Khorab Ltd contributes 150% for all employees to the pension fund and in equal to the medical fund. Leave is provided for at $ 12 000 per month.

2. The manufacturing overhead is allocated on the basis of direct labour hours. Budgeted manufacturing overhead amounted to $ 252 000 while budgeted direct labour hours amounted to 6 000 for the month under review.

3. The rental expenses include rent for both the factory and administration buildings. The factory;s rent expenses is double the rental of the administrative buildings.

4. All completed chocolates sweets are painted different colours. The paints is only indirect materials used in the manufacturing process. The factory's records show that 500 litres of paint were used during the month. The cost of the paint is $ 82 per litre.

5. Property rates and taxes are only charged on the factory premises.

6. The following breakdown of the insurance was obtained from the insurance schedule:

Factory 40%

Office building 30%

Shop 30%

7. Depreciation expense consists of the following:

Factory equipment $ 34 000

Office equipment $ 16 000

Shop equipment $ 5 000

8. The company produced 50 000 kg of chocolate candy in January 2019( probably you meant January). The current selling price of chocolate is $ 46 per kg.

Required:

Prepare a schedule of cost of goods sold manufactured and sold for Khorab Ltd for January 2019. Khorab Ltd closes off all over-or under -allocated manufacturing overhead to cost of goods sold at the end of each month.

  

Answer 1