Page 41 - DCOM206_COST_ACCOUNTING_II

Cost Accounting – II

Notes Problem 4:
From the following particulars, prepare:
(a) A statement of cost of manufacture for the year, 2007,
(b) A statement of profit as per cost accounts, and

(c) Profit and loss accounts in the financial books and show how you would attribute the
difference in the profit as shown by (b) and (c).
Opening stock of raw materials ` 30,000

Opening stock of finished goods ` 60,000
Purchases of raw materials ` 1,80,000
Stock of raw materials at the end ` 45,000
Stock of finished goods at the end ` 15,000

Direct wages ` 75,000
Calculate the factory expenses at 25% on prime cost, and office expenses at 75% on factory
expenses.

Actual factory expenses amounted to ` 58,125 and actual office expenses amounted at ` 45,750.
The selling price was fixed at a profit of 25% on cost.
Solution:

(a) Statement of Cost of Manufacture for the year 2007
Particulars Amount (`)
Opening stock of raw materials 30,000
Add : Purchases of raw materials 1,80,000
2,10,000
Less : Closing stock of raw materials 45,000
Cost of raw materials consumed 1,65,000
Direct wages 75,000
Prime Cost 2,40,000
Factory expenses (25% on prime cost) 60,000
Works or Factory Cost 3,00,000
Office expenses (75% on factory expenses) 45,000
Total Cost of Production 3,45,000

(b) Statement of Profit
Particulars Amount (`)
Total cost of production 3,45,000
Add : Opening stock of finished goods 60,000
4,05,000
Less : Closing stock of finished goods 15,000
Cost of Goods Sold 3,90,000
Profit (25% on cost) 97,500
Sales 4,87,500

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