In the absence of the accountant you have been asked to prepare a month's cost accounts for a company which operates a batch costing system fully integrated with the financial accounts. The cost clerk has provided you with the following information, which he thinks is relevant:

The production overhead absorption rate is 150% of direct wages, and it is the policy of the company to include a share of production overheads in the cost of capital equipment constructed in the factory.
Required:

(a) Prepare the follow1ng accounts for the month:
stores ledger control account work in progress control account finished goods control account production overhead control account profiUioss account.

(b) Identify any aspects of the accounts which you consider should be investigated.

(c) Explain why 11 is necessary to value a company's stocks at the end of each period and also why, in a manufacturing company, expense items such as factory rent. wages of direct operatives, power costs etc. are included in the value of work in progress and finished goods stocks

Transcribed Image Text:

() Balances at beginning of month: Stores ledger control account Work in progress control account Finished Goods control account Prepayments of production overheads brought forward from previous month Transactions during the month: Materials purchased Materials issued: to production for factory 24 175 19210 34 164 2100 () 76 150 26350 maintenance 3280 Materials transferred between batches 1450 Direct Indirect workers workers () ()