QUESTION 2 (30 MARKS: 72 MINUTES)

1. Miss Factual, the owner of Qilux Enterprise, operates her business in Penang, where she sells children toys. The following business transactions were completed in December 2020.

December 1 Purchased merchandise totalling RM20,000 from Babs Enterprise, half of the purchase was paid by cash. Credit term is 5/10, n/30.

5 Sold merchandise which worth RM9,700 on cash. Cost of goods sold was RM7,000.

8 Purchased merchandise on credit from Tobi Enterprise totalling RM17,000, terms FOB shipping point, 2/10, n/30. The transportation cost of RM200 is not yet added to the invoice.

10 Miss Factual paid Babs Enterprise for the balance outstanding on purchase of December 1.

14. Sold merchandise worth RM4,500 on credit to Putra Enterprise terms 4/10, n/30. Cost of goods sold was RM1,760.

15. Miss Factual paid Tobi Enterprise for the purchase made on December 8.

22 Received cash from Putra Enterprise for sale made on December 14.

24 Sold merchandise by RM12,000 on credit to Bukus Enterprise with terms 5/10, n/30. Cost of goods sold was RM5,700.

30 Bukus Enterprise returned merchandise totalling RM3,600 purchased on December 24. The cost of these items was RM1,300.

REQUIRED:

Prepare journal entries for the above transactions based on perpetual inventory system (explanation is not required).

(6 Marks)

2. Poor management of inventory creates a severe risk for organizations, most especially when the volume of inventory and the frequency of inventory movement is high. The perpetual inventory system and the periodic inventory system are the typical approaches used by business organizations to account for their inventory level.

REQUIRED:

Discuss the appropriate inventory management approach assuming that;

1. The volume of inventory and the frequency of inventory movement is high.

(4.5 Marks)

2. The volume of inventory and the frequency of inventory movement is low.

(4.5 Marks)

3. Sega Delight Sdn Bhd. manufactured numerous types of sport shoes. The followings are selected account balances of the company for the year ended 31 December 2020:

Items	RM
Administrative salaries	2,400
Advertising expense	1,200
Utilities costs	3,500
Depreciation expense	4,800
Direct labor cost	?
Beginning raw materials inventory	2,100
Ending raw materials inventory	3,200
Beginning finished good inventory	46,980
Ending finished good inventory	44,410
Administration insurance expense	2,240
Indirect labor cost	15,700
Factory insurance expense	3,400
Purchases of raw materials	14,600
Factory repair and maintenance	3,900
Marketing and selling salaries	2,000
Tax on factory	4,440
Sales commissions	1,410
Beginning work in process inventory	1,670
Ending work in process inventory	1,110

Additional information:

1. 80% of the utility costs apply to factory operations; the remaining amounts apply to selling and administrative activities.
2. 70% of depreciation expense is for the factory equipment; 30% is for the office equipment.
3. Direct labor cost is 40% of conversion cost.

REQUIRED:

1. Prepare a Statement of Cost of Goods Manufactured for the year ended 31 December 2020 (show your workings).

(11 Marks)

2. Explain manufacturing overhead costs and give ONE (1) example.

(2 Marks)

3. Differentiate between conversion cost and prime cost.

(2 Marks)