Question

Particulars Rs. Particulars Rs. Opening stock of raw material 13,000 Furniture and Fixtures 72,000 Plant and Machinery 98,000 Bank charges 5,453 Cash in hand 12,800 Cost of material available for use 62,000 Opening inventory of finished goods 8,000 Cost of direct material used 50,000 Sundry creditors 54,000 Direct labour cost 10,000 Sundry debtors 20,000 Factory overhead cost 5,000 Loan taken from bank 44,300 Sales 85,000 Cost of goods available for sale 75,000 Gross profit 21,000 Required: Based on the above information, you are required to calculate the amount of: 1. Purchases 2. Prime cost 3. Cost of goods manufactured 4. Conversion cost 5. Cost of goods sold

Answer 1

Opening stock of raw material =13,000

Cost of material available for use= 62,000

Opening inventory of finished goods = 8,000

Cost of direct material used = 50,000

Direct labour cost = 10,000

Factory overhead cost = 5,000

Sales = 85,000

Cost of goods available for sale = 75,000

Gross profit = 21,000

1. Purchases = Cost of material available for use - Opening stock of raw material

= 62,000 - 13,000

= 49,000

2. Prime cost = Cost of direct material used + Direct labour cost

= 50,000 + 10,000

= 60,000

3. Cost of goods manufactured = Cost of goods available for sale - Opening inventory of finished goods

= 75,000 - 8,000

= 67,000

4. Conversion cost = Direct labour cost + Factory overhead cost

= 10,000 + 5,000

= 15,000

5. Cost of goods sold = Sales - Gross profit

= 85,000 - 21,000

= 64,000