Q No.6 On 30 April 2002, the following balances were extracted from the books of Wilson

Manufacturing Company:

			Rs.
Sales			9,890,400
Purchases of raw materials			4,372,000
Carriage inwards			58,000
Carriage outwards			83,840
Stocks, 1 May 2001
Raw materials			225,522
Work in progress			30,180
Finished goods			194,500
Plant and machinery, at cost			980,000
Office equipment, at cost			385,000
Rent and rates			395,250
Electricity and water			134,400
Wages and salaries
Direct labour			491,100
Indirect labour			240,000
Administrative staff			910,150
Repairs to machinery			18,928
Other production expenses			326,400
Other administrative expenses			198,685

Additional information:

(i) Stocks as at 30 April 2002: Rs.

Raw materials 115,290

Work in progress 94,840

Finished goods 181,900

(ii) Depreciation was to be provided for:

Plant and machinery 15% on cost

Office equipment 20% on cost

(iii) Electricity and water was to be apportioned as follows:

Factory 75%

Administration 25%

(iv) Rent and rates was to be apportioned as follows:

Factory 80%

Administration 20%

REQUIRED:

(a) Briefly explain the difference between direct costs and indirect costs.

(b) Calculate the following for Wilson Manufacturing Company for the year ended 30 April 2002:

(i) Prime cost;

(ii) Total factory overheads; and

(iii) Production cost of each unitof finished goods, assuming that Wilson Manufacturing Company had produced 400,000 units of finished goods during the year.

(c) Prepare the trading account of Wilson Manufacturing Company for the year ended 30 April 2002.