Question
SNM Sdn Bhd was incorporated in April 2018. The company produces plastic container for local market. The company provides the following financial information that relates
SNM Sdn Bhd was incorporated in April 2018. The company produces plastic container for local market. The company provides the following financial information that relates to its operation for the month ended 31 March 2019:
SNM Sdn Bhd
Statement of Profit or Loss and Other Comprehensive Income
For the month ended 31 March 2019
RM | RM | |
Sales | 900,000 | |
Less : | ||
Indirect labor cost | 24,000 | |
Utilities expenses | 30,000 | |
Direct labor cost | 140,000 | |
Depreciation – factory equipment | 42,000 | |
Raw materials purchased | 330,000 | |
Depreciation – sales equipment | 36,000 | |
Insurance expenses | 8,000 | |
Rental expenses | 100,000 | |
Selling and administrative salaries | 64,000 | |
Advertising expenses | 150,000 | 924,000 |
Net loss | (24,000) |
The manager of SNM Sdn Bhd was disappointed with the loss appeared in the Statement of
Profit or Loss and Other Comprehensive Income (SPLOCI). He said “This month’s loss is worse than the other months. I think it’s time to start looking for someone to buy out the company’s assets. If we don’t do that, within a few months, there won’t be any assets to sell”.
Mrs.Syirah, the new company’s accountant, disagreed with the manager’s decision. She believes that there was something wrong with the SPLOCI and asked her assistant to investigate. After several days, her assistant provided her with the following information:
- Some of the operating expenses declared in the SPLOCI are a combination of factory operations and selling and administrative activities. Below are the correct distribution:
- Utilities expenses: 60% for factory and 40% for selling and administrative.
- Insurance expenses: 75% for factory and 25% for selling and administrative
- Rental expenses: 80 % for factory and 20% for selling and administrative
- Inventory balances for the month of March 2019 are as follows:
1 March 2019 (RM) | 31 March 2019 (RM) | |
Raw materials | 16,000 | 26,000 |
Work in process | 32,000 | 42,000 |
Finished goods | 80,000 | 120,000 |
REQUIRED:
- Prepare a complete schedule of cost of goods manufactured for the month ended 31 March 2019. (Show clearly all workings.)
- Prepare a new Statement of Profit and Loss and Other Comprehensive Income for the month ended 31 March 2019.
- The main mistake done in the original Statement of Comprehensive Income for SNM Sdn Bhd is the combination of product costs and period costs.
- Give TWO (2) differences of these two costs.
(ii) State ONE (1) example for each cost.
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