SOLUTION EXERCISES

E1.1 a) Unique Sdn. Bhd., a manufacturer of furniture list out costs and expenses usually
incurred in its factory. For each cost listed below, place a tick (/) in the appropriate
categories.

PRODUCT COSTS PERIOD

COSTS
Cost item Direct Direct Manufacturing
Materials Labours Overhead

a) Advertising /
b) Glue, nails, paint and other small
parts used in production. /
c) Woods used in manufacturing /
furniture
d) Salary of marketing staff /
e) Wages of assembly workers /
f) Sand paper /
g) Insurance on factory machines /

h) Depreciation of factory machine /

i) Office utilities /
j) Salary of factory supervisors /
k) Depreciation of photostat machine /
in office.
l) Salary of office manager /
m) Salaries for assembly line quality /
control inspectors.

1
 b) Unique Sdn. Bhd. reports the following costs and expenses in February 2017.

RM RM
Direct material:
Woods used in manufacturing furniture 100,500

Direct labour:
Wages of assembly workers 10,000

Manufacturing overhead:
Advertising 3,000
Glue, nails, paint and other small parts used in production. 1,870
Sand paper 1,000
Insurance on factory machines 3,320
Depreciation of factory machine 12,650
Salary of factory supervisors 20,000
Salaries for assembly line quality control inspectors. 21,500 63,340
Period costs:
Salary of marketing staff 12,000
Office utilities 5,000
Depreciation of photostat machine in office 1,250
Salary of office manager 24,000 42,250

E1.2

Direct Direct Manufacturing Total Work in Work in Cost of Goods

Materials Labour Overhead Manufacturing process Process Manufactured
Used Used Costs (1/1) (31/12)

a. 162,000 150,000 280,000 592,000 246,000 196,000 642,000

b. 75,000 185,000 340,000 600,000 200,000 180,000 620,000

c. 50,000 122,000 100,000 272,000 240,000 164,000 348,000

d. 27,500 72,000 55,500 155,000 231,500 190,000 196,500

e. 45,000 197,000 150,000 392,000 180,000 100,000 472,000

2
E1.3
a)
Berkat Sdn. Bhd.
Statement of Cost of Goods Manufactured for the year ended 31st March 2017.
RM RM
Beginning inventories raw materials 33,100
Raw materials purchases 246,300
(+) Carriage inwards of raw materials 2,700
Duties on purchase of raw materials 4,606
(-) Returns of raw materials (1,300) 252,306
285,406
Ending inventories raw materials (35,860)
Raw materials used 249,546
Factory workers’ wages 61,000
PRIME COST 310,546
Manufacturing overheads:
Factory manager’s salary 48,800
Insurance (80% x 5,880) 4,704
Rent (2/3 x 7680) 5,120
Factory utilities 4,680
Factory general expenses 1,926
Depreciation-machinery (10% x 170,800) 17,080
Loose tools (3460-2740) 720 83,030
Production cost 393,576

b)
Berkat Sdn. Bhd.
Income Statement for the year ended 31st March 2016.
RM RM
Sales of finished goods 500,000
(-) Cost of goods sold:
Beginning inventories 34,280
(+) Production cost 393,576
427,856
(-) Ending inventories 22,240 (405,616)
Gross profit 94,384
(-) Expenses:
Salesmen’s salary 9,600
Rent (1/3 x 7,680) 2,560
Insurance (20% x 5,880) 1,176 (13,336)
Net profit 81,048

3
E1.4
a)
Perfect Life Sdn. Bhd.
Statement of Cost of Goods Manufactured for the year ended 30 June 2017
RM RM
Beginning inventories raw materials 75,600
Raw materials purchases 356,200
(+) Carriage inwards of raw materials 6,048
Duties on purchase of raw materials 2,520
(-) Returns of raw materials (5,160) 359,608
435,208
Ending inventories raw materials (51,320)
Raw materials used 383,888
Wages of assembly workers 96,960
PRIME COST 480,848
Manufacturing overheads:
Repairs and maintenance for machine 9,200
Insurance (10/12 x 5,952) 4,960
Rent (80% x 27,360) 21,888
Factory utilities (3/4 x 16,160) 12,120
Factory general expenses 2,360
Depreciation-machinery (10% x 143,200) 14,320

Wages of indirect workers 44,120 108,968

Production cost 589,816
(+) Beg. WIP 24,640
614,456
(-) Ending WIP 31,840
Cost of goods manufactured 582,616

b)
Perfect Life Sdn. Bhd.
Income Statement for the year ended 30 June 2017
RM RM
Sales of finished goods 800,000
(-) Sales returns (6,872)
793,128
(-) Cost of goods sold:
Beginning inventories 59,080
(+) Production cost 582,616
Finished goods purchases 90,640
732,336
(-) Ending inventories 61,120 (671216)
Gross profit 121,912
(-) Expenses:
Rent (20% x 27,360) 5,472
Utilities (1/4 x 16,160) 4,040
Carriage outwards 6,680 (16,192)
Net profit 105,720
4
 E1.5
a) BILAL MANUFACTURING
Manufacturing Account for the year ended 31 March 2015
RM RM RM
Opening Stock of Raw Materials 19,780
Add: Purchases of raw materials 212,500
(-) Return Outwards (5,780)
(+) Carriage Inwards 2,700
209,420
(20,400
Less: Closing Stock of raw materials )
Cost of Raw Material Consumed 208,800

Direct Labour/Wages (116,200 + 3,800) 120,000

PRIME COST 328,800

Overhead Expenses:
Indirect Wages 44,600
Depreciation - Plant and Machine (10% * 52,000) 5,200
Utilities Expense (29,200 + 2,800) * 3/4 24,000
Insurance Expense (20,400 * 12/16 = 15,300) * 2/5 6,120
General Expense (16,960 * 60%) 10,176
Rent Expense (10,500 * 50%) 5,250
95,346
TOTAL COST OF PRODUCTION 424,146

(+) Opening Work In Progrss 21,400

(17,400
(-) Closing Work In Progress )
COST OF GOODS MANUFACTURED 428,146

5
b) BILAL MANUFACTURING
Income Statement for the year ended 31 March 2015
RM RM
Sales 696,000

Less: Cost of Goods Sold:

Opening Stock of finished goods 36,600
(+) Production cost of goods Completed 428,146
(32,400
(-) Closing Stock of finished goods )
C.O.G.S. 432,346
GROSS PROFIT 263,654

Less: Expenses:
Bad Debt 4,000
Depreciation - Office equipment (5% * (37,600 - 8,300) 1,465
Sales Commission to selling Agents 36,600
Office Salaries 43,000
Utilities Expense (29,200 + 2,800) * 1/4 8,000
Insurance Expense (20,400 * 12/16 = 15,300) * 3/5 9,180
General Expense (16,960 * 40%) 6,784
Rent Expense (10,500 * 50%) 5,250
Doubtful Debts 3,000 117,279
NET PROFIT 146,375
20/2 = 10 marks

6
 BILAL MANUFACTURING
Balance Sheet as at 31 March 2015
Non-current assets RM RM
Land and Building 80,000
Plant and Machine 52,000
(26,000
(-) Accumulated dep (20.8k + 5.2k) ) 26,000
Office Equipment 37,600
(-) Accumulated dep (8.3k + 1.465k) (9,765) 27,835

Current assets
Bank 45,600
Debtors 36,600
(-) Provision for Doubtful Debt (3,000) 33,600
Prepaid insurances 5,100
Closing stock :-
Finished goods 32,400
Work in process 17,400
Raw material 20,400 154,500
288,335

Current liabilities
Creditors 33,000
Direct Wages Payable 3,800
Utilities Payable 2,800 39,600

Owner's equity
Capital 102,360
(+) Net profit 146,375 248,735
288,335

7
E1.6

8
 E1.7

a)
Kiddo Manufacturing Company
Statement of Cost of Goods Manufactured
For the year ended 31 December 2017

Direct material:
Beginning raw material inventory 8,250
45,00
Purchases of raw materials 0
(-) purchase return – raw materials (700)
(+) freight in – raw materials 1,600 45,900
54,150
(-) ending raw material inventory (11,200)
Direct materials used 42,950
Direct labor 15,000
Manufacturing overhead:
Indirect labor 1,260
Rent expense – factory 7,720
Utilities Expenses (5400-800) 4,600
Insurance expenses (7000 – 100) x 60% 4,140
Depreciation expense - Plant and machinery 20,000 37,720
Manufacturing Cost 95,670
(+) Beginning Work In Process Inventory 5,600
(-) Ending Work In Process Inventory (3,900)
Cost of Goods Manufactured 97,370

b)
Kiddo Manufacturing Company
Income Statement
For the year ended 31 December 2017

Sales 117,210
(-) Sales return 460
Net sales 116,750
Cost of Goods Sold:
Beginning Finished Goods Inventory 4,000
(+) Cost of goods manufactured 97,370
101,370
(-) Ending Finished Goods Inventory (9,500)
Cost of Goods Sold 91,870
GROSS PROFIT 24,880
(-) Operating expenses:
Rent expense - office 1,490
Utilities Expenses 800
Insurance expenses (7000 – 100) x 40% 2,760
Depreciation expense – motor vehicles 5,000
Freight Out 2,400
Salaries -administrative (10,000 + 500) 10,500
Advertising expenses (4400+400) 4,800 (27,750)
Net Loss - 2,870