Question
Pattern Cement Pots Ltd manufactures different Pots from cement. The following information is applicable to the year ended 31 December 2021: Sales Sales turnover of
Pattern Cement Pots Ltd manufactures different Pots from cement. The following information is
applicable to the year ended 31 December 2021:
Sales
Sales turnover of 1 740 units for the sales total of N$ 1 078 800. All cement purchased during
the year was bought from Cement Wholesales Ltd, which allowed a settlement discount. The
Settlement discount received for the year was N$ 19 280.
Purchases
Cement (raw material) is purchased in kilograms. Raw material purchases during the year was
weighing 1 980 kg and the total purchase value was N$ 531 192. The delivery cost of raw material
was N$ 7 200. Furthermore, there was an abnormal wastage of 10% of raw material purchased
which took place during the year.
Inventories
Inventory on 1 January 2021 of raw material, consisted of 200 kg cement valued at N$ 44 400.
Inventory on 1 January 2021 of finished goods, consisted of 340 units valued at N$ 165 920. On
31 December 2021, N$ 73 120 raw material with the weight of 280 kg was the inventory on hand.
There was also 400 units of finished goods on hand at 31 December 2021. Inventory is valued
on the first-in-first-out (FIFO) basis.
Production
No wastage of cement occurs in the production process. Normal production capacity is estimated
at 2 000 units of finished goods per year. Raw material can be sold for N$ 248 per kg by Pattern
Cement Pots Ltd if advertised. Advertisement cost currently amounts to N$ 8 per kg. Finished
goods are currently marketed at N$ 540 per unit. Selling costs currently amounts to N$ 20 per
unit. At each financial year-end there was no work in progress on hand.
Salaries and wages
Potters (Paid per pot produced) a total value of N$ 338 400. Production manager a total value of
N$ 92 000. Administration and sales personnel a total value of N$ 56 000. Directors’
remuneration a total value of N$ 60 000.
Other information
Glaze used in production process was N$ 24 200. Electricity and water for the plant, which is
deemed a variable cost, amounted to N$ 11 400. The telephone costs was limited to N$ 3 800,
due to cost savings from the prior year. Advertising and other marketing costs amounted to
N$ 23 880. The depreciation for the plant and office equipment at a rate of 10% per year, straight
line method, was calculated on a cost price of the plant of N$ 406 000. The value of Office
equipment was N$ 9 200 on purchase date, which bought in the last 7 years. The repairs and
maintenance of the plant amounted to N$ 19 000, of which 60% is fixed costs
Questions
a) Calculate the value of the raw material used in the production process for the year ended 31
December 2021.
b) Calculate the cost of the closing inventory of raw material for the year ended
31 December 2021 in accordance to IAS 2 to comply with International Financial Reporting
Standards (IFRS).
c) Calculate the total number of units produced for the year ended 31 December 2021.
d) Calculate the cost of the closing inventory of finished goods of PCP Ltd for the year ended
31 December 2021 in accordance to IAS 2 to comply with International Financial Reporting
Standards (IFRS).
e) Prepare the profit before taxation note to the financial statements for the year ended
31 December 2021 in accordance with IFRS. Please include, depreciation and inventory write
down to net releasable value “NRV” as part of this note.
Step by Step Solution
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Step: 1
a To calculate the value of the raw material used in the production process for the year ended 31 December 2021 we need to consider the raw material purchases the delivery cost and the abnormal wastag...Get Instant Access to Expert-Tailored Solutions
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