MANUFACTURING ENTERPRISE: PRODUCTION COST STATEMENT (34 marks)

ABC Manufacturers manufacture sheep skin slippers. This business is a sole trader, which also has a factory store on their premises. The financial year ended on 30 June 2021. INSTRUCTION

Use the information provided to prepare the Production Cost Statement for the year ended 30 June 2021. Show the calculations in the space provided. (34)

INFORMATION:

Balances on 1 July 2020:
Raw material stock	48 000
Work-in- progress stock	68 215
Finished goods stock	56 900
Factory equipment at cost price	580 000
Accumulated depreciation on factory equipment	87 000
Consumable stores on hand	9 400
Transactions for the year ended 30 June 2021:
Raw materials purchased and paid for in cash	268 000
Raw materials purchased on credit	69 500
Damaged raw materials returned	9 500
Carriage paid in cash for raw materials delivered	15 850
Import duty on raw materials	9 800
Raw materials donated to charity	2 500
Consumable stores purchased	29 340
Damage consumables returned	1 660
Salaries and wages:
Wages: Direct labour	359 000
Wages: Cleaners	49 320
Factory foremans salary	92 300
Salaries: Sales personnel	56 000
Salaries: Administrative staff	76 100
Maintenance of factory equipment	18 150
Insurance: Administration department	22 500
Bad debts	2 250
Commission on sales	24 200
Sundry administrative expenses	35 800
Rent expense	48 760
Balances on 30 June 2021:
Raw material stock	56 300
Workin-progress stock	132 980
Consumable stores on hand	4 250
Finished goods stock	?

Additional information and adjustments:

1. The premises was initially rented out at an amount of R4 000 per month, since 1 January 2019. An annual increase of 15% comes in effect on 1 January every year. Make an additional adjustment for the rent expense.

Rent expense is allocated according to the amount of floor space used. The allocation is as follows:

The total premises uses 1 200 m. The factory uses 960 m and the remaining floor space is divided equally between the administration department and the sales department.

2. The amount given for insurance is only towards the administrative department. The amount represents 15% of the total insurance expense. 75% of the amount is allocated to the factory and the remainder to the sales department
3. 60% of the consumable expense is towards factory use.
4. An invoice for maintenance of the factory equipment was received, but not taken into account, R15 000
5. Depreciation on factory equipment is calculated at 20% per annum on carrying value. Take note that additional factory equipment amounting to R56 000 was purchased on 1 October 2020.
6. A total gross increase of R6 000 on the cleaners wages was not taken into account. The UIF regarding this increase was also not recorded. The employees contributes 1% of their gross wages to UIF and the employer contributes R1 for every R1 contributed by the employees. 85% of the expense is allocated to the factory, 10% towards the administrative department and the remainder to the sales department.
7. Total pairs of slippers produced during the year ended 30 June 2021 amounted to 24 800 pairs of slippers

[40]

ANSWER SHEET:

PRODUCTION COST STATEMENT OF ANS MANUFACTURES FOR THE YEAR ENDED 30 JUNE 2021

Direct material cost
Direct labour cost	359 000
Direct cost/Primary cost
Factory overheads
Total manufacturing cost
Work in progress stock opening balance
Work in progress stock closing stock
Total cost of production of finished goods

(34)

Please provide all calculations step by step