SNM Sdn Bhd was incorporated in April 2018. The company produces plastic container for local market. The company provides the following financial information that relates to its operation for the month ended 31 March 2019:

SNM Sdn Bhd

Statement of Profit or Loss and Other Comprehensive Income

For the month ended 31 March 2019

	RM	RM
Sales		900,000
Less :
Indirect labor cost	24,000
Utilities expenses	30,000
Direct labor cost	140,000
Depreciation – factory equipment	42,000
Raw materials purchased	330,000
Depreciation – sales equipment	36,000
Insurance expenses	8,000
Rental expenses	100,000
Selling and administrative salaries	64,000
Advertising expenses	150,000	924,000
Net loss		(24,000)

The manager of SNM Sdn Bhd was disappointed with the loss appeared in the Statement of

Profit or Loss and Other Comprehensive Income (SPLOCI). He said “This month’s loss is worse than the other months. I think it’s time to start looking for someone to buy out the company’s assets. If we don’t do that, within a few months, there won’t be any assets to sell”.

Mrs.Syirah, the new company’s accountant, disagreed with the manager’s decision. She believes that there was something wrong with the SPLOCI and asked her assistant to investigate. After several days, her assistant provided her with the following information:

1. Some of the operating expenses declared in the SPLOCI are a combination of factory operations and selling and administrative activities. Below are the correct distribution:

• Utilities expenses: 60% for factory and 40% for selling and administrative.
• Insurance expenses: 75% for factory and 25% for selling and administrative
• Rental expenses: 80 % for factory and 20% for selling and administrative

2. Inventory balances for the month of March 2019 are as follows:

	1 March 2019 (RM)	31 March 2019 (RM)
Raw materials	16,000	26,000
Work in process	32,000	42,000
Finished goods	80,000	120,000

REQUIRED:

1. Prepare a complete schedule of cost of goods manufactured for the month ended 31 March 2019. (Show clearly all workings.)

2. Prepare a new Statement of Profit and Loss and Other Comprehensive Income for the month ended 31 March 2019.

3. The main mistake done in the original Statement of Comprehensive Income for SNM Sdn Bhd is the combination of product costs and period costs.

1. Give TWO (2) differences of these two costs.

(ii) State ONE (1) example for each cost.

Answer rating: 100% (QA)

RM RM Sales 900000 Less indirect labour cost 24000 Utilities expenses 30000 Direct Labour Cost 14000... View the full answer