Mr Len Naidoo, the owner of Widget Distributors, has in the past imported widgets. However, from 1 January 20x8, he decided to manufacture the widgets himself.

Here is the abridged statement of financial position of Widget Distributors at 31 December 20x7:

From a scrutiny of vouchers and other documents you find that these transactions have taken place during the year ended 31 December 20x8:

• Cash transactions as per the cash book:

• Amounts owing, totalling R3 500, were written off as bad debts.

• 5 500 units were sold.

– A royalty of 10 cents per completed unit manufactured during the year is payable in arrears on 1 January of the following year.

– In addition, the following balances at 31 December 20x8 were determined:

– Inventory is valued at factory cost using the first-in-first-out basis.
– Work-in-progress at 31 December 20x8 was 75% complete in respect of raw material, and 45% complete in respect of direct labour and overheads.

You are required to:

1. Prepare the statement of the cost of goods manufactured for Widget Distributors for the year ended 31 December 20x8.

2. Calculate the gross profit of Widget Distributors for the year ended 31 December 20x8.

Transcribed Image Text:

Capital - Len Naidoo Accounts payable 2 000 00 Inventory (1 000 units) 1 000 00| Accounts receivable Bank 3 000 00 800 00 700 00 1 500 00 3 000 00