ar. Fixed manufacturing overheads are allocated to the cost of inventory based on direct labour hours worked REQUIRED: Calculate the following balances that will be disclosed in the statement of financial position of Elysees Limited as at 31 August 2018: a) Raw materials
Elysees Ltd is a company that imports and retails luxury goods from France. They
have retail outlets at various high-end shopping centres throughout South Africa.
As the financial accountant for Elysees Limited, you have been tasked with
establishing the correct carrying amount of the inventory for the financial year
ended 31 August 2018.
Inventory
Due to the recent economic recession and in a bid to boost sales in the local
environment, Elysees Limited began manufacturing faux leather handbags and
shoes for resale to middle income consumers. The following information is
available for the financial year ended 31 August 2018:
Details
Raw material purchased for the year (in metres) 75 000
Raw material issued to production during the year (in metres) 52 500
Raw material per unit produced (in metres) 1
Direct labour per hour (Rands) R8
Actual production hours for the year 138 000
Variable manufacturing overheads R127 500
Budgeted fixed manufacturing overheads R900 000
Normal production capacity (hours per month) 15 000
Selling price (per unit) R900
Delivery cost (per unit) R25
Sales commission 15% of selling
price
There was no raw material in inventory at the beginning of the financial year.
The cost of raw materials purchased for the year amounted to R2 841 750.
At 31 August 2018, 30% of the finished goods was still on hand.
There was no opening or closing work-in-progress inventory for the financial
year.
Fixed manufacturing overheads are allocated to the cost of inventory based
on direct labour hours worked
REQUIRED:
Calculate the following balances that will be disclosed in the
financial position
a) Raw materials
Step by step
Solved in 2 steps with 2 images
