The following balances refer to the workshop of the Casablance Engineering Company for the half year ended 31 December Year 6. $ Inventory at 1 July Year 6: Raw materials Work in progress Finished goods Direct factory wages Indirect factory wages Licence fees paid to patent holder Heating and lighting General factory expenses Insurance on plant Rates on factory premises Purchases of raw materials Raw materials returned to suppliers 7 566 16 989 12 716 39 264 26 076 15 440 4 506 12 710 5 274 3 244 135 556 1 652 Plant at cost 65 280 Depreciation provision: plant Inventory at 31 December Year 6 Raw materials Finished goods Market value of goods completed 26 112 6 354 10 034 350 000 Noted 1. Licence fees are to be treated as a direct expense 2. Expenses owing at 31 December Year 6 were: Direct wages $580: indirect wages $666; general expenses $223. 3. Expenses prepaid at 31 December Year 6 were: Insurance $422; rates $274; heating and lighting $156. 4. Plant is to be depreciated at the rate of 5 per cent on cost of the period. REQUIRED a. Show the manufacturing account for the six months ended 31 December Year 6, assuming that closing work in progress is valued at 5 per cent of full factory cost inclusive of work in progress b. Given that the production capacity of this factory only totals 30 000 units a month. What advice would you give to the management if there was a sudden increase in demand which outstripped their production capacity? How could such an increase in demand be met? Discuss
The following balances refer to the workshop of the Casablance Engineering Company for the half year ended 31 December Year 6. $ Inventory at 1 July Year 6: Raw materials Work in progress Finished goods Direct factory wages Indirect factory wages Licence fees paid to patent holder Heating and lighting General factory expenses Insurance on plant Rates on factory premises Purchases of raw materials Raw materials returned to suppliers 7 566 16 989 12 716 39 264 26 076 15 440 4 506 12 710 5 274 3 244 135 556 1 652 Plant at cost 65 280 Depreciation provision: plant Inventory at 31 December Year 6 Raw materials Finished goods Market value of goods completed 26 112 6 354 10 034 350 000 Noted 1. Licence fees are to be treated as a direct expense 2. Expenses owing at 31 December Year 6 were: Direct wages $580: indirect wages $666; general expenses $223. 3. Expenses prepaid at 31 December Year 6 were: Insurance $422; rates $274; heating and lighting $156. 4. Plant is to be depreciated at the rate of 5 per cent on cost of the period. REQUIRED a. Show the manufacturing account for the six months ended 31 December Year 6, assuming that closing work in progress is valued at 5 per cent of full factory cost inclusive of work in progress b. Given that the production capacity of this factory only totals 30 000 units a month. What advice would you give to the management if there was a sudden increase in demand which outstripped their production capacity? How could such an increase in demand be met? Discuss
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:The following balances refer to the workshop of the Casablance Engineering Company for the half
year ended 31 December Year 6.
Inventory at 1 July Year 6:
Raw materials
7 566
Work in progress
Finished goods
Direct factory wages
Indirect factory wages
Licence fees paid to patent holder
Heating and lighting
General factory expenses
Insurance on plant
Rates on factory premises
16 989
12 716
39 264
26 076
15 440
4 506
12 710
5 274
3 244
Purchases of raw materials
135 556
Raw materials returned to suppliers
1 652
Plant at cost
65 280
Depreciation provision: plant
Inventory at 31 December Year 6
26 112
Raw materials
Finished goods
Market value of goods completed
6 354
10 034
350 000
Noted
1. Licence fees are to be treated as a direct expense
2. Expenses owing at 31 December Year 6 were: Direct wages $580: indirect wages $666;
general expenses $223.
3. Expenses prepaid at 31 December Year 6 were: Insurance $422; rates $274; heating and
lighting $156.
4. Plant is to be depreciated at the rate of 5 per cent on cost of the period.
REQUIRED
Show the manufacturing account for the six months ended 31 December Year 6,
assuming that closing work in progress is valued at 5 per cent of full factory cost
inclusive of work in progress
b. Given that the production capacity of this factory only totals 30 000 units a
a.
month. What advice would you give to the management if there was a sudden
increase in demand which outstripped their production capacity? How could
such an increase in demand be met?
Discuss.
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