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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:

  1. 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

  1. 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:

  1. Prepare a complete schedule of cost of goods manufactured for the month ended 31 March 2019. (Show clearly all workings.)

  1. Prepare a new Statement of Profit and Loss and Other Comprehensive Income for the month ended 31 March 2019.

  1. The main mistake done in the original Statement of Comprehensive Income for SNM Sdn Bhd is the combination of product costs and period costs.

  1. Give TWO (2) differences of these two costs.

(ii) State ONE (1) example for each cost.

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