Jojomat Ltd owns a small business making and selling children’s toys. The following trial balance was extracted from her books on 31 December 2020: Particulars Debit RM Credit RM Capital 15,000 Drawings 2,000 Sales 90,000 Inventory at 1 January 2020: Raw materials Finished goods 3,400 6,100 Purchased of raw materials 18,000 Carriage inwards 800 Factory wages 18,500 Office salaries 16,900 Jojomat : Salary and expenses 10,400 General expenses: Factory Office 1,200 750 Lighting 2,500 Rent 3,750 Insurance 950 Advertising 1,400 Bad debts 650 Discount received 1,600 Carriage outwards 375 Plant and machinery, a cost less depreciation 9,100 Car, at cost less depreciation 4,200 Bank 3,600 Cash in hand 325 Account receivable and account payable 7,700 6,000 TOTAL 112,600 112,600 Additional information: Inventory at 31 December 2020: Raw materials RM2,900 Finished goods RM8,200 Depreciation for the year is to be charged as follows: Plant and machinery RM1,500 Car RM500 iii. At 31 December 2020 insurance paid in advance was RM150 and office general expenses unpaid were RM75 Lighting and rent are to be apportioned :4/5 Factory, 1/5 Office v. Insurance are to be apportioned: ¾ Factory ¼ Office Jojo is the business sales person and her salary and expenses are to be treated as a selling expense. She has sole use of a business car. Required: a) Prepare statement of cost production for the year ended 31 December 2020. b) Prepare statement of comprehensive income for the year ended 31 December 2020. c) Prepare statement of financial position as at 31 December 2020.
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
Jojomat Ltd owns a small business making and selling children’s toys.
The following
Particulars |
Debit RM |
Credit RM |
Capital |
15,000 |
|
Drawings |
2,000 |
|
Sales |
90,000 |
|
Inventory at 1 January 2020: Raw materials Finished goods |
3,400 6,100 |
|
Purchased of raw materials |
18,000 |
|
Carriage inwards |
800 |
|
Factory wages |
18,500 |
|
Office salaries |
16,900 |
|
Jojomat : Salary and expenses |
10,400 |
|
General expenses: Factory Office |
1,200 750 |
|
Lighting |
2,500 |
|
Rent |
3,750 |
|
Insurance |
950 |
|
Advertising |
1,400 |
|
|
650 |
|
Discount received |
1,600 |
Carriage outwards |
375 |
|
Plant and machinery, a cost less |
9,100 |
|
Car, at cost less depreciation |
4,200 |
|
Bank |
3,600 |
|
Cash in hand |
325 |
|
|
7,700 |
6,000 |
TOTAL |
112,600 |
112,600 |
Additional information:
- Inventory at 31 December 2020:
- Raw materials RM2,900
- Finished goods RM8,200
- Depreciation for the year is to be charged as follows:
- Plant and machinery RM1,500
- Car RM500
iii. At 31 December 2020 insurance paid in advance was RM150 and office general expenses unpaid were RM75
- Lighting and rent are to be apportioned :4/5 Factory, 1/5 Office v. Insurance are to be apportioned: ¾ Factory ¼ Office
- Jojo is the business sales person and her salary and expenses are to be treated as a selling expense. She has sole use of a business car.
Required:
- a) Prepare statement of cost production for the year ended 31 December 2020.
- b) Prepare statement of comprehensive income for the year ended 31 December 2020.
- c) Prepare
statement of financial position as at 31 December 2020.
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