Mutiara Manufacturing is a company which manufactures and sells on rubber wood furniture. The following list of balances as at 31 December 2018 has been extracted from the books of Mutiara Manufacturing:

Capital 130,000

Account Receivables 32,000

Account Payables 12,000

Bank 34,000

Drawings 3,300

Plant and Machinery at net book value (1 January 2018) 60,000

Motor Vehicles at net book value (1 January 2018) 35,000

Office Equipment at net book value (1 January 2018) 10,000

Sales 330,000

Purchase of loose tools 2,200

Purchases of raw materials 67,000

Direct factory wages 30,000

Light and power 3 ,000

Indirect factory wages 15,200

Machinery repairs 5,500

Motor Vehicle expenses 4,320

Rent and insurance 20,300

Selling and distribution expenses 14,000

Raw materials at 1 January 2018 10,200

Carriage inwards of raw materials 3,300

Administrative staff salaries 15,000

Finished goods at 1 January 2018 24,200

Work-in-progress at 1 January 2018 35,000

Carriage outwards 3,900

Administrative expenses 7,800

Allowance for unrealized profit at 1 January 2018 4,033

Additional information:

i. Insurance paid in the year amounted to RM10,000. The payment is for one years premium beginning on 1 April 2018.

ii. At 31 December 2018, light and power owing amounted to RM190.

iii. All expenses related to vehicles will be apportioned between factory and office at 40:60.

iv. The allocation of other expenses are as follows:

Factory Office

Light and power 2 1

Rent and insurance 3 1

v. It is the policy of the business to depreciate its assets using the reducing balance method based on the following rates:

Plant and machinery 12.5%

Motor vehicles 10%

Office equipment 20%

vi. Inventory as at 31 December 2018 are as follows:

Raw materials 2,300

Work-in-progress 10,500

Finished goods 10,200

Loose tools 2,100

vii. Goods manufactured during the year are to be transferred from the factory at cost plus 20%

Required:

a) The Manufacturing Account for the year ended 31 December 2018. (10 marks)

b) The Income Statement for the year ended 31 December 2018. (8 marks)

c) Explain, with example, the difference between direct cost and indirect cost. (2 marks)