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## Q. 4.1

During the year to 31 December 2014, Lars Anderson incurs the following costs in his
factory, which produces cakes for sale to hotels and restaurants:

 £ Ingredients 102,952 Wages to factory workers 74,120 Wages owed to factory workers 6,300 Factory rent and rates 12,500 Factory light and heat 8,543 Wages to supervisors 26,100 Depreciation of factory machinery 3,910 Inventory of raw materials on 1 January 2014 12,400 Inventory of raw materials on 31 December 2014 11,500 Partly completed inventory (work in progress) on 1 January 2014 1,540 Partly completed inventory (work in progress) on 31 December 2014 640

Calculate the cost of manufacturing (for inclusion as part of the ‘cost of sales’ in the
income statement) for the year ended 31 December 2014.

## Verified Solution

Lars Anderson
Cost of manufacturing for the year ended 31 December 2014

 £                                                  £ Raw materials Opening inventory at 1 January 2014 12,400 Add Purchases of raw materials $\frac{102,952}{115,352}$ Less Closing inventory at 31 December 2014 $\frac{(11,500)}{}$ Cost of raw materials 103,852 Other direct costs: Production labour (74,120 + 6,300) $\frac{80,420}{184,272}$ Prime cost of production Indirect factory costs: Rent and rates 12,500 Light and heat 8,543 Wages to supervisors 26,100 Depreciation of factory machinery $\frac{3,910}{}$ $\frac{51,053}{235,325}$ Add Opening work in progress 1,540 Less Closing work in progress $\frac{(640)}{}$ 900 Cost of manufacturing $\frac{}{\frac{236,225}{} }$