Korkorri Products Limited manufactures baby security chairs used in motor vehicles to strap in babies to protect them in case of an accident. The following information relates to their financial year ended 31 December 20x1:

Costs incurred during 20x1                                                                                         N$
Wages (60% manufacturing, 40% administrative): all variable	4 500 000
Variable overheads (60% production; 40% administrative)	1 500 000
Depreciation (80% on manufacturing plant; 20% on office furniture)	1 500 000
Fixed overheads (70% for factory rent; 30% salaries paid to managers not directly
involved in the factory)	1 500 000
Storage warehouse rent and insurance (annual)	150 000
Sales agents’ commissions paid for the year	600 000
Transportation costs
	Inwards: (i.e. relating to purchase of raw materials)	150 000
	Outwards (i.e. relating to sales of finished goods)	75 000
Raw materials purchased during 20x1
	Marked price of raw materials purchased during 20x1	1 530 000
	Less trade discount received	(30 000)
	Less cash discount received	(45 000)
Packaging expenses
	Packaging material of fragile raw material (required by law)	450 000
	Packaging material to transport products to sales outlets	750 000

At the beginning of the financial year 1 January 20x1 the following balances were on hand:

	R
Raw materials	150 000
Work-in-progress	375 000
Completed (finished) baby chairs	225 000

Additional information:

1. Korkorri Products Limited budgeted to produce 375 000 baby chairs during 20x1 but produced only 300 000 baby chairs in 20x1.

2.Fixed overheads are allocated to cost of inventory based on units of production.

3.Depreciation of the manufacturing plant is considered to be a fixed cost.

4.30% of the cost of raw materials was still on hand at 31 December 20x1.

5.20% of the cost of work-in-process was still on hand at 31 December 20x1.

6.10% of the cost of finished goods was still on hand at 31 December 20x1.

7.No stock of packaging material was on hand, as it is supplied by a local wholesaler on demand.

REQUIRED:

a) Calculate the following amount for the 20x1 financial year:

1. The amount of fixed manufacturing overheads allocated to work-in-progress;

2. The amount of fixed manufacturing overheads that had to be expensed;

3. The amount of raw materials used for the year;

4. The balance of work-in-progress on hand on 31 December 20x1; and

5. The value of finished goods on hand on 31 December 20x1

b) Prepare the inventory note to the financial statements at 31 December 20x1 in accordance with International Financial Reporting Standards (IFRS). (3.5) V.

Answer rating: 100% (QA)

Proforma Cost Sheet Particulars Amount Rs Total Cost Rs Direct Materials Opening Stock of Materials ... View the full answer