A manufacturing company's inventory at the end of an accounting period includes a finished product with...

Transcribed Image Text:

A manufacturing company's inventory at the end of an accounting period includes a finished product with the following costs to date: Purchase price of materials Less: 5% trade discount Import duty at 10% Direct labour costs Allocation of fixed production overheads Storage costs since product completed Advertising costs Total Cost 9,000 (450) 8,550 855 5,850 2,840 225 317 18,637 Notes: (i) All of these costs exclude VAT. The company is able to recover any VAT. which it is charged by its suppliers, but cannot recover import duties. (ii) One-third of the materials included above were wasted as the result of an abnormal machine malfunction. (iii) Fixed production overheads are allocated to products on the assumption that production is running at normal capacity. In fact, production was unusually low during the period in which the product was made and a further allocation of £820 would be required if fixed overheads were allocated on the basis of actual production. (iv) The advertising costs were incurred whilst trying to find a buyer for the product. No buyer had been found by the end of the accounting period. Required: Calculate the cost of this product in accordance with the requirements of IAS2 Inventories. A manufacturing company's inventory at the end of an accounting period includes a finished product with the following costs to date: Purchase price of materials Less: 5% trade discount Import duty at 10% Direct labour costs Allocation of fixed production overheads Storage costs since product completed Advertising costs Total Cost 9,000 (450) 8,550 855 5,850 2,840 225 317 18,637 Notes: (i) All of these costs exclude VAT. The company is able to recover any VAT. which it is charged by its suppliers, but cannot recover import duties. (ii) One-third of the materials included above were wasted as the result of an abnormal machine malfunction. (iii) Fixed production overheads are allocated to products on the assumption that production is running at normal capacity. In fact, production was unusually low during the period in which the product was made and a further allocation of £820 would be required if fixed overheads were allocated on the basis of actual production. (iv) The advertising costs were incurred whilst trying to find a buyer for the product. No buyer had been found by the end of the accounting period. Required: Calculate the cost of this product in accordance with the requirements of IAS2 Inventories.

Answer rating: 100% (QA)

Particulars Amount Amount Material 8550 Less Abnor... View the full answer