QUESTION ONE (10 Marks)
The following transactions of Berain Manufacturers, that uses the perpetual inventory system, took place during February 2024 in respect of a part used in production:
| Feb | ||
| 01 | Stock on hand | 600 units @ R34 per unit |
| 08 | Issued to production | 420 units |
| 15 | Purchased from supplier | 1800 units @ R35.50 per unit |
| 16 | Issued to production | 700 units |
| 17 | Returned to supplier (purchased on 15 February 2024) | 120 units |
| 26 | Issued to production | 800 units |
Using the first-in-first-out (FIFO) method, calculate the value of closing inventory as at 28 February 2024.
QUESTION TWO (20 Marks)
The following information was extracted from the accounting records of Hilton Manufacturers for the year ended September 2024:
| UNITS | |
| Inventory at the beginning of the year | Nil |
| Production for the year | 28 500 |
| Sales for the year | 24 000 |
| Selling price per unit | R82 |
| R | |
| Direct Materials cost per unit | 22 |
| Direct Labour cost per unit | 11 |
| Variable Manufacturing overheads per unit | 7 |
| Variable selling and administrative cost per unit | 5 |
| Fixed manufacturing overhead cost | 274 000 |
| Fixed selling and administrative cost | 95 000 |
The company utilises the first-in-first-out method of inventory valuation.
REQUIRED:
(Round of to two decimal places)
Prepare the Income Statement using the Marginal Costing method. (11)
Prepare the Income Statement using the Absorption Costing method. (9)
Answers on Above Questions on Management Accounting
Answer 1: The value of closing inventory as at 28 February 2024 by using the first in first out (FIFO) is calculated as follows:
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