Preparing manufactory account
CL plc is a manufacturing business. Goods are transferred from the factory at a fixed percentage profit, which has remained unchanged for some years. The directors provided the following information for the year ended 31 December 2017. CL plc has the opportunity to buy in finished goods at a cost 5% lower than the cost of each unit it manufactures. (d) Advise the directors whether or not they should take this opportunity. Justify your answer. [4] (e) (0) State what is meant by the term 'prime cost'. Revenue Prime cost Factory overheads Distribution costs Administrative expenses Finance charges Work in progress at 1 January 2017 Inventory of finished goods at transfer price at 1 January 2017 Work in progress at 31 December 2017 Inventory of finished goods at transfer price at 31 December 2017 1820 000 780 000 152 000 283 800 343 100 47 100 17 000 126000 25 000 96 000 33 (il) State one example of a cost which would be included in prime cost. (Ill) State one example of a cost which would be included in factory overheads. [Total: 25) The following information is also available: 1 The provision for unrealised profit account was as follows: CL plc Provision for unrealised profit account 2017 2017 Dec 31 Income statement 5000 Jan 1 Balance b/d Balance cld 16000 21 000 2018 Jan 1 Balance b/d 21 000 21000 16000 2 Total rent for the business was $100 000 for the year. All of this had been included in administrative expenses. However, 50% of it related to the factory, 25% to the offices and 25% to the distribution centres. 3 The taxation charge for the year was $39400. Answer the following questions in the Question Paper. Questions are printed here for reference only. (a) Calculate the percentage of factory profit used by the company. [3] (b) Prepare the manufacturing account for the year ended 31 December 2017 in as much detail as possible. (c) Prepare the income statement for the year ended 31 December 2017 [11] CL plc is a manufacturing business. Goods are transferred from the factory at a fixed percentage profit, which has remained unchanged for some years. The directors provided the following information for the year ended 31 December 2017. CL plc has the opportunity to buy in finished goods at a cost 5% lower than the cost of each unit it manufactures. (d) Advise the directors whether or not they should take this opportunity. Justify your answer. [4] (e) (0) State what is meant by the term 'prime cost'. Revenue Prime cost Factory overheads Distribution costs Administrative expenses Finance charges Work in progress at 1 January 2017 Inventory of finished goods at transfer price at 1 January 2017 Work in progress at 31 December 2017 Inventory of finished goods at transfer price at 31 December 2017 1820 000 780 000 152 000 283 800 343 100 47 100 17 000 126000 25 000 96 000 33 (il) State one example of a cost which would be included in prime cost. (Ill) State one example of a cost which would be included in factory overheads. [Total: 25) The following information is also available: 1 The provision for unrealised profit account was as follows: CL plc Provision for unrealised profit account 2017 2017 Dec 31 Income statement 5000 Jan 1 Balance b/d Balance cld 16000 21 000 2018 Jan 1 Balance b/d 21 000 21000 16000 2 Total rent for the business was $100 000 for the year. All of this had been included in administrative expenses. However, 50% of it related to the factory, 25% to the offices and 25% to the distribution centres. 3 The taxation charge for the year was $39400. Answer the following questions in the Question Paper. Questions are printed here for reference only. (a) Calculate the percentage of factory profit used by the company. [3] (b) Prepare the manufacturing account for the year ended 31 December 2017 in as much detail as possible. (c) Prepare the income statement for the year ended 31 December 2017 [11]
