Petra Petrova is the owner-manager of Petra Pots Ltd, which makes plant pots. The business plans to produce 2,000 units over the next month and each unit requires the same amount of materials and takes the same time to produce. The expected costs for next month are as follows:

Required

(a) Prepare a costing statement for Petra Pots Ltd that shows the elements of cost and calculates the total cost of producing 2,000 pots.

(b) Interpret your statement by explaining the following terms:
■ direct costs ■ prime cost ■ production cost ■ indirect costs ■ total cost.

Transcribed Image Text:

E Rent: Factory 1,000 Office 400 Lighting and heating: Factory 2,000 Office 800 Power 700 Factory wages: Operators (piecework) 10,000 Maintenance staff (fixed) 1,500 Canteen staff (fixed) 2,500 Sand, cement and clay 6,000 Depreciation: Moulds 2,200 Factory fixtures and fittings 800 Office equipment 200 Office salaries 1,800 Sales team's salaries and commission 2,200 Sales team's car expenses 1,600 Delivery expenses 500 Cement mixer repairs 900 Finishing paint Packing 200 800