Question

The Swift Company has just completed its operations for September 2005. The company's accountant resigned two weeks ago, subsequently a very inexperienced clerk has prepared the following income statement of the month's activities: INCOME STATEMENT FOR THE MONTH ENDED 30 SEPTEMBER 2005 RR Sales 450 000 Less: Operating expenses 476 000 Indirect labour cost 12 000 Electricity and water 15 000 Direct labour cost 90 000 Depreciation: factory equipment 21 000 Raw materials purchased 159 000 Depreciation: sales equipment 18 000 Insurance 4 000 Rent 50 000 Selling and administrative salaries 32 000 Advertising 75 000 Net loss 26 000

Answer 1

1. Schedule of cost of goods manufactured:

Materials: Opening Balance	8000
Add: Purchases	159000
Less: Closing balance	-27000	140000
Direct Labour cost	Given	90000
Prime Cost		230000
Indirect Labour		12000
Electricity and water	15000*60%	9000
Depreciation		21000
Insurance	4000*75%	3000
Rent	50000*80%	40000
Total Manufacturing Cost		315000
Add: Opening Wip		16000
Less: Closing Wip		-21000
Cost of Goods manufactured		310000

Income Statement

Cost of goods manufactured		310000
Add:
Selling and Administrative expenses	32000
Advertising	75000
Rent (50000*20%)	10000
Insurance (4000*25%)	1000
Depreciation sales equipment	18000
Electricity (15000*40%)	6000	142000
Total Cost		452000
Add: Opening finished goods		40000
Less: Closing finished goods		-60000
Total cost of goods sold		432000
Profit		18000
Sales		450000