A manufacturing company operates a non-integrated accounting system. At the end of Month 1 of the...

  

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A manufacturing company operates a non-integrated accounting system. At the end of Month 1 of the financial year the following reconciliation statement was prepared. £ Profit as per cost accounts Add: Raw material closing stock difference Work-in-progress opening stock difference Finished goods opening stock difference Selling and distribution overheads over absorbed Production overheads over absorbed Notional rent charge Deduct: Raw material opening stock difference Work-in-progress closing stock difference Finished goods closing stock difference Administration overheads under absorbed Profit as per financial accounts In the cost ledger, overheads are absorbed as follows: Production overheads Administration overheads Selling and distribution overheads 1,200 500 2,500 900 3,500 7,500 1,100 800 2,600 1,500 £12.50 per direct labour hour. 10% of sales 6% of sales £ 29,000 16,100 6,000 39,100 Any over/under absorbed overhead balance at the end of a month is carried forward to the following month in the cost ledger. Any balance remaining at the end of a financial year is transferred to the Profit and Loss Account. Sales in Month 1 were £600,000 and 9,000 direct labour hours were worked. In the financial ledger the following stocks relate to Month 1: Raw materials Work-in-progress Finished goods REQUIRED Opening stock £ 110,000 30,000 300,000 Closing stock £ 120,000 40,000 350,000 (a) Calculate for Month 1: (i) The opening and closing stock values in the cost ledger. (ii) The actual overhead expenditure for each of the three categories. (b) Suggest a reason why the cost and financial accounting valuations for raw material stock are different. (c) Explain what the item Notional rent charge means A manufacturing company operates a non-integrated accounting system. At the end of Month 1 of the financial year the following reconciliation statement was prepared. £ Profit as per cost accounts Add: Raw material closing stock difference Work-in-progress opening stock difference Finished goods opening stock difference Selling and distribution overheads over absorbed Production overheads over absorbed Notional rent charge Deduct: Raw material opening stock difference Work-in-progress closing stock difference Finished goods closing stock difference Administration overheads under absorbed Profit as per financial accounts In the cost ledger, overheads are absorbed as follows: Production overheads Administration overheads Selling and distribution overheads 1,200 500 2,500 900 3,500 7,500 1,100 800 2,600 1,500 £12.50 per direct labour hour. 10% of sales 6% of sales £ 29,000 16,100 6,000 39,100 Any over/under absorbed overhead balance at the end of a month is carried forward to the following month in the cost ledger. Any balance remaining at the end of a financial year is transferred to the Profit and Loss Account. Sales in Month 1 were £600,000 and 9,000 direct labour hours were worked. In the financial ledger the following stocks relate to Month 1: Raw materials Work-in-progress Finished goods REQUIRED Opening stock £ 110,000 30,000 300,000 Closing stock £ 120,000 40,000 350,000 (a) Calculate for Month 1: (i) The opening and closing stock values in the cost ledger. (ii) The actual overhead expenditure for each of the three categories. (b) Suggest a reason why the cost and financial accounting valuations for raw material stock are different. (c) Explain what the item Notional rent charge means

Answer rating: 100% (QA)

aiOpening stock values in cost ledger Raw materials 110000 Workinprogress 30000 Finished goods 30000... View the full answer