Years Sales Gross Profit Rs. Rs. 2002 40,000 11,555 2003 45,000 11,132 2004 50,0
ID: 2447665 • Letter: Y
Question
Years
Sales
Gross Profit
Rs.
Rs.
2002
40,000
11,555
2003
45,000
11,132
2004
50,000
13,452
2005
52,000
12,897
2006
60,000
17,654
Assignment No-1 Financial accounting II(MGT-401)
Fall Semester 2009
Question
ICI Ltd produced soda ash. That product uses in differentindustries. The property of this product is highly inflammable. Theposition of inventory at the beginning of year 2007 is asfollows:
Inventories at Jan 1, 2007 consisted of:
Particulars
Rs
Finished goods
8,000
Work-In-Process
6,000
Materials
1,200
Total
15,200
A fire broke out in a factory at July 31, 2007 destroying allWork-in-Process inventories. After the fire, the inventories werevalued as follows:
Particulars
Rs
Materials
4,000
Finished goods
7,000
In 2007 the amount of Gross profit is based on average GP toSale ratio of last 5 years 2002 to onward 2006. An analysis of pastfinancial statements reflected as follows:
Virtual University of Pakistan
Assignment No-1 Financial accounting II(MGT-401)
Fall Semester 2009
Data for 7 months to 2007 is given as follows:
Particulars
Rs.
Sales
20,000
Material Purchases
5,600
Direct Labor
6,000
FOH
3,000
Required: Calculate the Value of Work-In-Process destroyed byfire in 2007
Calculate the Value Gross Profit in 2007
Virtual University of Pakistan
Years
Sales
Gross Profit
Rs.
Rs.
2002
40,000
11,555
2003
45,000
11,132
2004
50,000
13,452
2005
52,000
12,897
2006
60,000
17,654
Explanation / Answer
Raw material inventory beginning 1200
Add : purchases 5600
Cost of material available for use 6800
Less: raw material ending 4000
Direct raw material cost 2800
Add Direct labour cost 6000
Add FOH 3000
Total factory cost 11800
Add: W.I.P beginning 6000
Cost of good to be sold 17800
Less: W.I.P closing 4200
Cost of good manufacture 13600
Add: finished goods beginning 8000
Cost of good available for sale 21600
Less: finished goods ending 7000
Cost of good sold 14600
Calculation of GP = last five years G.P/Last five years sale X100
Calculation of GP = 66690/ 247000 X 100
Calculation of GP = 27% of sales
GP = 0.27 * 20000
GP = 5400
Cost of good sold = Sales – G.P
Cost of good sold = 20000 – (20000 X 0.27)
Cost of good sold =20000 – 5400
Cost of good sold =14600
WIP= 4200
G.P= 5400
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