M/s Modern Company Ltd furnishes the following summary of Trading & Profit and Loss account for the current year ending March 31.
To Raw Material 140000 By sales (12000 units) 510000
To direct wages 72000 By finished stock (200 units) 6000
To production overheads 45000 By work in Process
To selling & distribution overheads 43500 Material 26800
To administration overheads 41010 Wages 11786
To Preliminary Expenses w/off 3250 Production overheads 8000 46586
To Goodwill w/off 2541 By interest on securities (gross) 5000
To dividend (net) 4000
To income-tax 5870
To net profit 210415
567586 567586
The Company manufactures a standard unit. The scrutiny of cost records for the same period shows that-
1. factory overheads have been allocated to production at 20 percent on prime cost
2. Administration overheads have been charged at Rs.3 per cent on units produced
3. Selling & distribution expenses have been charged at Rs.4 per unit on unit sold.
You are required to prepare a statement of cost, to work out profit as per cost accounts, and to reconcile the same with that shown in the financial accounts.