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The following information relates to Moses Manufacturers, a small business that manufactures photo frames - English General - NSC Accounting - Question 5 - 2017 - Paper 1
Question 5
The following information relates to Moses Manufacturers, a small business that manufactures photo frames. The financial year ended on 30 April 2016. **Required:** ... show full transcript
Worked Solution & Example Answer:The following information relates to Moses Manufacturers, a small business that manufactures photo frames - English General - NSC Accounting - Question 5 - 2017 - Paper 1
Step 1
Prepare the Production Cost Statement for the year ended 30 April 2016.
Answer
Production Cost Statement for the year ended 30 April 2016
Direct Material Cost Calculation:
Purchases of raw materials = R555 000
Less defective materials = R21 000
Direct Material Cost = R555 000 - R21 000 = R534 000
Direct Labour Cost:
Direct Labour Cost = R716 960
Factory Overhead Cost:
Factory Overhead Cost = R468 450
Total Manufacturing Cost Calculation:
Total Manufacturing Cost = Direct Material Cost + Direct Labour Cost + Factory Overhead Cost
= R534 000 + R716 960 + R468 450 = R1 719 410
Cost of Production of Finished Goods:
Cost of Production of Finished Goods = Number of Units Produced * Cost per Unit
= 39 000 * R45 = R1 755 000
Gross Profit:
Gross Profit = R1 250 000
Summary:
- Direct Material Cost: R534 000
- Direct Labour Cost: R716 960
- Factory Overhead: R468 450
- Total Manufacturing Cost: R1 719 410
- Cost of Production of Finished Goods: R1 755 000
- Gross Profit: R1 250 000
Step 2
Complete the abridged (shortened) Income Statement to calculate the net profit for the year ended 30 April 2016.
Answer
Abridged Income Statement for the year ended 30 April 2016
Gross Profit:
Gross Profit = R1 250 000
Less:
- Selling and Distribution Cost = R609 850
- Administration Cost = R443 950
Net Profit Calculation:
Net Profit = Gross Profit - (Selling and Distribution Cost + Administration Cost)
= R1 250 000 - (R609 850 + R443 950)
= R1 250 000 - R1 053 800
= R196 200