Question

ISK	ISK
administrative expenses	30,000
Depreciation of production equipment	10,000
Inventory of raw materials on 1 February	6,000
Inventory of raw materials Feb 29,	12,000
Factory property costs	4,000
Office Costs	1,000
Market and distribution costs	24,000
Salary of factory manager	18,000
Wages of factory workers	22,000
Rent office sales office	7,000
Raw material purchase	41,000
Cash and cash equivalents (bank)	172,900
Accounts receivable	94,200
Accounts payable	39,000
Sales revenue	247,000
Sales commissions	18,000
Various factory costs	6,000
Units
Quantity produced	20,000
Quantity sold	18,000

1. Calculate the factory direct production costs.

2. Calculate the plant's production costs, inventory value at the end of September as well as the cost   of goods sold (KSV) of the month.

3. Prepare a September income statement for Verksmiðjan ehf.

Answer 1

1.

Particulars	Amount
Depreciation of production equipment	10,000
administrative expenses	30,000
Factory property costs	4,000
Office Costs	1,000
Salary of factory manager	18,000
Wages of factory workers	22,000
Raw material purchase	41,000
Various factory costs	6,000
Total	1,32,000

2.

(i)

Calculation of Plant's production cost
Particulars	Amount
Depreciation of production equipment	10,000.00
administrative expenses	30,000.00
Factory property costs	4,000.00
Office Costs	1,000.00
Salary of factory manager	18,000.00
Wages of factory workers	22,000.00
Raw material purchase	41,000.00
Various factory costs	6,000.00
Total Production cost	1,32,000.00
Total Production cost per unit	6.60

(ii)

Calculation of inventory value at the end of September
	Particulars	Units	Amount
	Opening Inventory	6000
Add:	Quantity Produced	20000
Less:	Quantity Sold	18000
	Cloasing Inventory in units		8000
	Per unit cost of inventory(i.e before selling exp)		6.6
	inventory value at the end of September		52800

(iii)

Calculation of cost of goods sold (KSV) of the month
Particulars	Amount
administrative expenses	30,000
Depreciation of production equipment	10,000
Factory property costs	4,000
Office Costs	1,000
Market and distribution costs	24,000
Salary of factory manager	18,000
Wages of factory workers	22,000
Rent office sales office	7,000
Raw material purchase	41,000
Sales commissions	18,000
Various factory costs	6,000
Total Cost	1,81,000
Total Cost for a unit	10

3.

Income Statement
Particulars	Amount
A. Income
Sales revenue	2,47,000
Other income	-
Total Income	2,47,000
B. Expenses
administrative expenses	30,000
Depreciation of production equipment	10,000
Factory property costs	4,000
Office Costs	1,000
Market and distribution costs	24,000
Salary of factory manager	18,000
Wages of factory workers	22,000
Rent office sales office	7,000
Raw material purchase	41,000
Sales commissions	18,000
Various factory costs	6,000
Total Expenses	1,81,000
Net Profit	66,000