PRACTICE QUESTIONS 1. Differentiate between manufacturing and merchandising firms.
2. Write short notes on the following:
a) Direct costs b) Material costs c) Labour costs d) Factory overheads.
3. How will you explain prime cost to a friend?
4. What are the components of production cost of goods completed?
5. The following is the trial balance of Asare George Cable Manufacturing Co. Ltd.
as at December 31, 1996:
Trial Balance as at December 31.1996
Dr(e) Cr. (C)
Capital
840,000
Sales
2,762,116
Purchases of raw materials
871,052
Creditors
192,276
Debtors
155,162
Cash
190,400
Opening stock: raw materials
355,796
work in progress
39,284
finished goods
239,400
Machinery
700,000
Accumulated depreciation
203,000
Office equipment
32,200
Sales returns and allowances
24.080
Carriage on raw materials
51,800
Direct labour
609,980
Indirect labour
69,748
Rent
134,400
Light and power
25,606
Factory insurance
36,400
Advertising expenses
16,800
Sales staff salaries
334,656
General office expenses
38,150
Miscellaneous factory costs
72.478
3.997,392 3,997,392
Additional information:
a. Closing Stock: raw materials ¢171,570
work in progress 16,562
finished goods €386,540
b. Insurance prepaid 45,950
c. Direet labour: Wages and salaries accrued $47.530
d. Allocate rent as follows: factory 60%; administration 40%.
e. Depreciation: Machinery --- 20% of book value.
Office equipment -- 15% of cost.
Required. Prepare a Manufacturing. Trading and Profit and Loss Accounts and a
Balance Sheet for Asare as at the end of the period.