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Manufacturing Account Example for 2007

This document provides a manufacturing account worked example for the year ended 31 December 2007. It includes calculations for cost of raw materials consumed, direct costs, prime cost, factory overheads, cost of production at cost price and transfer price. It also includes an income statement, and workings to calculate opening and closing provision for unrealized profit in the provision for unrealized profit account.

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Roshan Ramkhalawon
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189 views4 pages

Manufacturing Account Example for 2007

This document provides a manufacturing account worked example for the year ended 31 December 2007. It includes calculations for cost of raw materials consumed, direct costs, prime cost, factory overheads, cost of production at cost price and transfer price. It also includes an income statement, and workings to calculate opening and closing provision for unrealized profit in the provision for unrealized profit account.

Uploaded by

Roshan Ramkhalawon
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
  • Overview and Account Details
  • Manufacturing Account
  • Trading Account
  • Provision for Unrealized Profit

Manufacturing Account Worked Example

Question 2
Manufacturing Account for the year ended 31 December 2007
Cost of Raw Materials Consumed
Opening Inventory of Raw Materials 10000
Add Purchases of raw materials 230400
240400
Less closing inventory of Raw Materials (10000)
Cost of Raw Materials Consumed 230400
Add Direct Cost
Manufacturing royalties (17500 – 400) 17100
Direct wages (358210 + 1290) 359500 376600
Prime Cost 607000
Add Factory overheads 215000
822000
Work in Progress
Opening inventory work in progress 12500
Less closing inventory work in progress (12500) -
Cost of production at cost price 822000
Add Factory profit ?? (1126140 – 607000) 304140
Cost of production at transfer price 1126140

Factory profit = Markup X cost of production at cost price


304140 = (X/100) X 822 000
X = (304140 X 100) / 822 000 = 37%
Income Statement for the year ended 31 December 2007
Revenue 1750000
Less cost of sales
Opening inventory finished goods (transfer price) (W1) 15867
Add cost of production 1126140
1142007
Less closing inventory finished goods (18769) (1123238)
Gross Profit 626762

Working 1 (W1)
Opening inventory at transfer price
= Opening inventory at cost + markup
= 12300 + (29% X 12300) = $15 867

Provision for unrealized profit account


1 Jan 2007 Balance b/d (W2) 3 567
31 Dec 2007 Balance c/d 5 069 31 Dec 2007 Income Statement 1 502
5 069 5 069
1 Jan 2008 Balance b/d (W3) 5 069

Working 2 (W2)
Opening provision for unrealized profit
= Opening inventory transfer price – Opening inventory at cost
= 15 867 – 12 300
= $3 567

Working 3 (W3)
Closing provision for unrealized profit
= (Factory profit / Cost of production at transfer price) X Closing inventory transfer price
= (304 140 / 1 126 140) X 18 769
= $5 069

Or
Closing provision for unrealized profit
= Closing inventory transfer price – closing inventory cost
= 18 769 - [18 769 / (1 + 0.37)]
= $5 069

Manufacturing Account Worked Example Question 2
Manufacturing Account for the year ended 31 December 2007 Cost of Raw Materials Consumed Opening Inventory of Raw Mat
Income Statement for the year ended 31 December 2007 Revenue 1750000 Less cost of sales Opening inventory fi

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