Manufacturing Account Worked Example

Question 9

raw materials
Depreciation factory machinery = 25% X (420 – 52) = 92 – MA
Depreciation office equipment = 10% X 30 = 3 - IS

Depreciation on motor vehicles

Existing NBV = 60 – 34 = 26

Disposal NBV Remaining NBV New Cost

Proceed – NBV disposed = profit = 26 – 3 = 23 =9
4 – NBV disposed = 1
NBV disposed = 4 – 1 = 3

No depreciation in year of disposal Deprecaition Depreciation

Depreciation = 0 = 25% X 23 = 25% X 9
= 5.75 = 2.25
Total deprecation = 0 + 5.75 + 2.25 = 8

Indirect labour = 16 000 ; Direct labour = 153 000 – 16 000 = 137 000
MA = 4/5 X (25000 + 5000) = 24 000
IS = 1/5 X (25000 + 5000) = 6 000

MA = 3/5 X (60 000 – 10000) = $30 000

IS = 2/5 X (60 000 – 10000) = $20 000

MA = 1/3 X 12 000 = 4000

IS = 2/3 X 12000 = 8000

MA = 5/6 X 18 000 = 15000

IS = 1/6 X 18 000 = 3000
Manufacturing Account for the year ended 31 March 2013
$000 $000
Cost of Raw Materials Consumed
Opening inventory of Raw Materials 17
Add purchases of Raw materials 194
Add carriage on raw materials 6
217
Less closing inventory raw materials (18)
Cost of Raw Materials Consumed 199
Add Direct Costs
Direct Labour 137
Prime Cost 336
Add Factory overheads
Indirect labour 16
Electricity 24
Rent 30
Sundry expenses 4
Insurance 15
Depreciation factory machinery 92 181
517
Work-In-Progress
Opening inventory work-in-progress 19
Less closing inventory work-in-progress (15)
Decrease in work-in-progress 4
Cost of production 521
Income Statement for the year ended 31 March 2013
$000 $000
Revenue 816
Less cost of sales
Opening inventory finished goods 32
Add cost of production 521
553
Less closing inventory finished goods (41) (512)
Gross Profit 304
Add other incomes
Profit on disposal 1
305
Less expenses
Electricity 6
Carriage outwards 22
Rent 20
Salaries 14
Sundry expenses 8
Insurance 3
Depreciation on office equipment 3
Depreciation on motor vehicles 8 (84)
Profit for the year 221