Lambchop

this is a request from my girlfriend and my sister who are in the same course at uni!they are stuck on a tutorial question.can anyone help?if so working is appreciated not just answers

A fire has completely destroye a manufacturing plant and its contents.however certain records relating to the operations of the plant were kept in another building.they revealed the following information for the period 1 january 2002 to 15th april 2002:

direct materials purchased £190000
work in progress 1 jan 02 £20000
direct materials 1 jan 02 £18000
finished goods 1 jan 02 £25000
direct manufacturing labour 55% of conversion costs
prime costs £300000
indirect manufacturing costs £130909
sales revenues £520000
gross margin percent based on sales 25%
cost of goods available for sale £400000


from above records management accountant of the company has been asked by the directors of the company to determine the value of its stocks.

required:
calculate the cost of:
1 finished goods stock 15 april 02(7 marks)

2 work in progress stock 15 april 02(8marks)

3 direct materials stock 15 apr 02(10marks)



can anyone make any sense of this gobbledeegook? pls help if poss

chop

ThePosh

OK, I know it's a bit sad but...

Materials
Dr Cr
190000
18000
135000


208000 135000

73000

WIP
Dr Cr
20000
300000
130909 400000


450909 400000

50909

Finished Goods
Dr Cr
25000
390000
400000


425000 390000

35000


(Assuming that direct costs include labour then material cost to WIP is 45% of £300,000)

Shark

Sorry but WTF does the above mean

Fat Boy

edit his message to see it properly

P20SPD

iTrader: (1)

Yep agree with the above

Materials
190000 Dr (Materials purchased)
18000 Dr (Stock at 1 jan 02)
135000Cr (£300,000 prime costs less 55% as labour)

equals
208000 Dr 135000 Cr
equals
73000 Dr therefore Materials in stock at 15 April 02

WIP

20000 Dr (Stock at 1st Jan 02)
300000 Dr (Prime costs)
130909 Dr (Indirect costs)
400000 Cr (transfer to Finish goods)
equals
450909Dr 400000 Cr
equals
50909 Dr Therefore WIP at 15 April 02

Finished Goods

25000 Dr (Stock at 1 Jan 02)
390000 Cr (Cost of goods sold see working below)
400000 Dr (Transfer from WIP)
Equals
425000 Dr 390000 Cr
Equals
35000 Dr therefore finished goods in stock at 15 April 02

Working for cost of goods sold

Sales 520000 = 100%
Margin = 25% of sales, therefore 130000

Therefore cost of goods sold = 520000-130000 = 390000

Hope that helps and makes it a bit clearer for the non Accountants

Lambchop

what a legend!!!

cheeRS m8!i'll pass that on right now!

and nice ist post posh!

thanx again

chop

Redkop

Told ya Chop Wouldnt have got that on RSOC

Lambchop

correctamundo lynne

Redkop

You would have got what Shark put above

P1Fanatic

lol at the title - loads of people are doing 'it' at uni. And probably a lot that aren't but still saying that they are

Gordo

The above answers assume that cost of good available for sale (£400k) is all produced in the period and is therefore additional to the £25k finished goods you start with.

If the £25k you start with is also 'available for sale' then only an additional £375k finished goods has been produced in the period for the company to have £400k 'available for sale'

Direct materials remains the same - i.e. close at £73k

Finished goods becomes £10k (£25k plus £375k manufactured less £390k cost of sales)

WIP becomes £75,909 (opening £20k plus £300k direct plus £130,909 indirect less £375k moved to finished goods)

and this is before you start looking at percentage completion of WIP ......

have fun!

Gordo

P20SPD

iTrader: (1)

Thats why i added the "transfer to finish goods" decription, it then makes it clear to someone marking that that is the assumption you have made. ie i am transfering this amount because this is what i have finished producing in the period.

Given the simplicity of the question, i dont see why it is relevant to mention % completion of WIP. Can only confusion the poor soul even more.

If you are going to do that then you might as well start mentioning equivalent units in relation to the % WIP

I suspect that % completion will come later on in their studies.

Go on baffle them even more.

Would be interesting to know what they are studying though! Suspect its something lower down the scale of the qualifications level. Not being snobby, just interested as i have a couple of juniors who work under me, and its always interesting to compare.

Printed it out and asked them to do it as a test, still have not come back to me yet

Steven

Redkop

And you expected ME to answer it for you Chop

Gordo

haha - excellent, I bet your juniors are glad they came in today now!

you're right, just be clear in your answer what your assumptions are and you can go off chuckling with 100% in the bag

Gordo

TaviaRS

The management account would need to ask two questions:

1. What insurance have we got for stock
2. What would you like the answer to be

And I wonder why I never made it as an accountant

P20SPD

iTrader: (1)

lol

will ask them for it in the morning