Answer :
A production cost statement is also referred to as a cost of goods manufactured (COGM) statement, which is used to calculate the cost of creating a good or service for a specific period. The cost of raw materials, direct labor, and manufacturing overhead are all included in this calculation.
The following data was given for the year ended December 31, 2022.
Balances 1 January 2022R
Raw materials 20 000
Work in progress 30 000
Finished goods 55 000
Direct wages due 400
Direct wages prepaid 200
Electricity due 800
Purchases of raw materials for the year 245 000
Carriage inwards 3 000
Customs duty 4 000
Purchases returns 5 000
Raw materials costing R10 000
sold 18 000
Direct wages paid 90 000
Electricity paid 3 400
Insurance, factory 1 200
Repairs to equipment (factory) 2 740
Returns inwards 10 000
Sales 792 000
Land and buildings at cost 200 000
Equipment (factory) at cost 60 000
Provision for unrealised profit on stock of finished goods 5 500
Office furniture at cost 14 000
Motor vehicles at cost 50 000
Rates (factory) 4 800
Water (75% factory) 4 200
Stationery and printing (factory) 5 100
Factory maintenance 12 000
Postage and telephone (factory) 1 800
Accumulated depreciation: office furniture 5 600
equipment 24 000motor vehicles 15 000
Other expenses (sundry) 235 240
Further information1.
R Balances 31 December:
Raw materials 30 000
Work in progress 24 000
Electricity due 600
Direct wages due 960
Finished goods ?
Stock of finished goods had not been taken at 31 December 2022, but the business works on a gross profit mark-up percentage of 50% on turnover. This calculation is based on the price at which manufactured goods are delivered to the sales department by the factory.
2. Depreciation to be provided: Factory equipment at 10% per annum on cost.Office furniture at 5% per annum on cost.Motor vehicles at 20% per annum on cost.
RequiredDraw up the production cost statement and income statement of the business for the year ended 31 December 2022.
The following information is given in the problem and should be taken into account in the production cost statement: Direct material cost: Opening balance of raw materials inventory + Raw materials purchases – Return inwards – Raw materials inventory at the end of the period = Direct material cost.
Direct labor cost:Direct wages paid during the year + Direct wages due at the end of the year - Direct wages prepaid at the beginning of the year = Direct labor cost.
Factory overhead cost:Total factory overhead cost – Depreciation of factory equipment – Factory insurance – Repairs to factory equipment – Factory maintenance cost – Factory rates – Water – Stationery and printing – Postage and telephone = Factory overhead cost.
Total Production cost:Direct material cost + Direct labor cost + Factory overhead cost = Total production cost.Income statementSales – Cost of goods sold (i.e., Total production cost + opening inventory of WIP – closing inventory of WIP – opening inventory of finished goods) = Gross profit.
Gross profit – operating expenses (other expenses + selling expenses) – unrealized profit on closing stock of finished goods (closing inventory of finished goods × 50%) = Net profit.
Using the above information, we can prepare the production cost statement and income statement for Joytoys Manufacturers for the year ended December 31
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