Question

The following information relates to a company ABC Ltd for the year ended 30 June 2020:

Transaction totals for the year ended 30 June 2020	R
Credit purchases of raw materials	503750
Freight on raw materiasl purchased (on credit)	99833
Sales of finished producgts	11440000
Direct Labour:
Factory wages	828600
Pension fund contributions paid by employer	172500
Medical aid paid by employer	227200
UIF Contributions paid by employer	8144
Indirect Labour	500250
Electricity
Factory	211450
Administration offices	127900
Rent Expenses
Factory	82700
Administration offices	105900
Telephone and fax
Facotry	111166
Administrative offices	145438
Insurance
Factory	205894
Administration offices	132716
Selling and administration costs	327195
Stationary	60445
Salaries and administration staff	488250
Sales returns of finished products	49361
Consumabiles stores (indirect materials issued to the factory)	144710
Depreciation on factory machinery	180211

Balances on 1 July 2019	R
Raw Materials inventory	127894
Work in progress inventory	43394
Finished goods inventory	216450

Balances on 30 June 2020	R
Work in process goods on hand	617450
Raw material on hand	99000
Finished products on hand	477716

Required:

Prepare the production cost statement, trading statement and the relevant notes for the year ended 30 June 2020.

Answer 1

Please find below the required solution for above given question:

In the books of ABC Ltd.
Production Cost Statement
For the year ended 30 June, 2020	Amt. (in R)	Amt. (in R)
Direct Materials:
Beginning Raw Materials Inventory	127,894
Add: Purchases of Raw Materials	503,750
Add: Freight on Raw Materials purchased	99,833
Less: Ending Raw Materials Inventory	99,000
Direct Materials used in production - [A]		632,477
Direct Labour:
Factory wages	828,600
Pension fund contributions paid by employer	172,500
Medical aid paid by employer	227,200
UIF Contributions paid by employer	8,144
Direct Labour cost used in production - [B]		1,236,444
Manufacturing Overheads:
Indirect Labour	500,250
Electricity - Factory	211,450
Rent Expenses - Factory	82,700
Telephone and fax - Factory	111,166
Insurance - Factory	205,894
Indirect Materials issued to the Factory	144,710
Depreciation on Factory Machinery	180,211
Manufacturing Overheads used in production - [C]		1,436,381
Total Manufacturing Costs = [A] + [B] + [C]		3,305,302
Add: Beginning WIP Inventory		43,394
Less: Ending WIP Inventory		617,450
Cost of Goods Manufactured for the year		2,731,246
Add: Beginning Finished Goods Inventory		216,450
Less: Ending Finished Goods Inventory		477,716
Cost of Goods Sold		2,469,980

Trading and Profit/Loss Statement for the year ended 30 June, 2020
Particulars	Amt. (in R)	Amt. (in R)	Particulars	Amt. (in R)	Amt. (in R)
Beginning Inventory:			Sales of finished products	11,440,000
Raw Materials	127,894		Less: Sales returns of finished products	49,361	11,390,639
WIP	43,394
Finished Goods	216,450	387,738	Ending Inventory:
			Raw Materials	99,000
Purchases of Raw Materials	503,750		WIP	617,450
Add: Freight on purchases	99,833	603,583	Finished Goods	477,716	1,194,166
Direct Labour Cost		1,236,444
Manufacturing Overheads		1,436,381
Gross Income or Profit c/f		8,920,659
		12,584,805			12,584,805
Electricity - Administration offices		127,900	Gross Income or Profit c/d		8,920,659
Rent Expenses - Administration offices		105,900
Telephone and fax - Administration offices		145,438
Insurance - Administration offices		132,716
Selling and administration costs		327,195
Stationary		60,445
Salaries and administration staff		488,250
Net Income or Profit c/f		7,532,815
		8,920,659			8,920,659