Question
Renewable Energy Manufacturing Ltd is a leading manufacturer of solar panels. The following data are taken from its accounting records for the financial year ending
Renewable Energy Manufacturing Ltd is a leading manufacturer of solar panels.
The following data are taken from its accounting records for the financial year ending 31 December 2022:
$ | |
Sales | 4,425,000 |
Purchases of raw material | 1,500,000 |
Direct labour cost incurred | 1,050,000 |
Other selling and administrative expenses | 180,000 |
Indirect labour cost (60% for factory; 40% for selling & admin) | 600,000 |
Other manufacturing expenses | 225,000 |
Depreciation of building (75% for factory; 25% for selling & admin) | 300,000 |
Depreciation of equipment (85% for factory; 15% for selling & admin) | 240,000 |
Income tax expense | 60,000 |
Indirect material used (all for factory) | 45,000 |
Insurance on factory & equipment (90% for factory; 10% for selling & admin) | 75,000 |
Electricity (80% for factory; 20% for selling & admin) | 150,000 |
Raw material inventory, 1 January 2022 | 120,000 |
Raw material inventory, 31 December 2022 | 90,000 |
Work in process, 1 January 2022 | 30,000 |
Work in process, 31 December 2022 | 45,000 |
Finished goods inventory, 1 January 2022 | 75,000 |
Finished goods inventory, 31 December 2022 | 105,000 |
The company uses normal costing and manufacturing overhead is applied at the rate of 125% of direct labour cost.
Required:
(a) Compute the manufacturing costs incurred for the current year.
(b) Compute the cost of goods manufactured (COGM) for the current year.
(c) Compute the manufacturing overhead variance.
(d) Compute the cost of goods sold (COGS) if the company closes overapplied or underapplied overhead cost into the cost of goods sold.
(e) Prepare Renewable Energy Manufacturing Ltds Income statement for the year.
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