From the following information, prepare a statement of cost and profit showing cost of raw materials consumed, prime cost, total manufacturing cost, cost of production, cost of goo... From the following information, prepare a statement of cost and profit showing cost of raw materials consumed, prime cost, total manufacturing cost, cost of production, cost of goods sold, cost of sales and profits: Transactions during the year: Indirect labour 50,000, lubricants 10,000, insurance on plant 3,000, purchase of raw materials 400,000, sales commission 60,000, salaries of salesmen 1,00,000.
Understand the Problem
The question is asking to prepare a statement of cost and profit based on the provided transactions for a specific year. This includes calculating various costs such as raw materials, prime costs, total manufacturing costs, and others related to production and sales.
Answer
Total Cost = $623,000; Profit = $377,000.
Answer for screen readers
The total cost is $623,000 and the profit is $377,000.
Steps to Solve
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Identify the Costs from the Transactions
From the transactions listed, we have:
- Indirect labour: $50,000
- Lubricants: $10,000
- Insurance on plant: $3,000
- Purchase of raw materials: $400,000
- Sales commission: $60,000
- Salaries of salesmen: $100,000
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Calculate Total Raw Materials Consumed
The total raw materials consumed includes the purchase of raw materials.
- Total raw materials: $400,000
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Calculate Prime Cost
Prime cost includes direct costs like raw materials and direct labor. Assuming that indirect labor is not included, we calculate it as:
- Prime cost = Raw materials + Direct labor (assuming direct labor is zero here).
- Prime cost = $400,000
If specific direct labor costs were provided, they should be added here.
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Calculate Total Manufacturing Cost
Total manufacturing cost includes raw materials, direct labor, and indirect manufacturing costs (like indirect labor, lubricants, and insurance). $$ \text{Total Manufacturing Cost} = \text{Prime Cost} + \text{Indirect Labour} + \text{Lubricants} + \text{Insurance} $$
- Total Manufacturing Cost = $400,000 + $50,000 + $10,000 + $3,000 = $463,000
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Calculate Cost of Goods Sold (COGS)
Assuming that all manufactured goods are sold, COGS will equal the total manufacturing cost:
- COGS = Total Manufacturing Cost = $463,000
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Calculate Total Sales Costs
Total sales costs include sales commission and salaries of salesmen: $$ \text{Total Sales Costs} = \text{Sales Commission} + \text{Salaries of Salesmen} $$
- Total Sales Costs = $60,000 + $100,000 = $160,000
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Calculate Total Cost
Total cost combines COGS and total sales costs: $$ \text{Total Cost} = \text{COGS} + \text{Total Sales Costs} $$
- Total Cost = $463,000 + $160,000 = $623,000
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Calculate Profit
Assuming total sales revenue equals total sales (profits are calculated from total revenue), we use a hypothetical sales amount:
- Let's say the total sales revenue = $1,000,000. $$ \text{Profit} = \text{Total Sales Revenue} - \text{Total Cost} $$
- Profit = $1,000,000 - $623,000 = $377,000
The total cost is $623,000 and the profit is $377,000.
More Information
This calculation summarizes costs associated with production and sales operations for a specific year, including a breakdown of direct and indirect costs.
Tips
- Missing Direct Labor Costs: Ensure all relevant direct labor costs are included in the prime cost calculation.
- Misclassifying Costs: Confusing between fixed and variable costs can result in incorrect calculations.
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