IGCSEAccountingCambridge (CIE)Exam Questions5. Preparation of Financial StatementsFinancial Statements for Manufacturing Businesses

Financial Statements for Manufacturing Businesses (Cambridge (CIE) IGCSE Accounting): Exam Questions

Exam code: 0452 & 0985

2 hours20 questions

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Financial Statements for Manufacturing Businesses

1a
Sme Calculator10 marks

Fozia opened a factory manufacturing wheelchairs on 1 May 2022.

Fozia provided the following information.

At 1 May 2024
$

At 30 April 2025
$

Inventory

Raw materials

8 100

7 600

Work in progress

6 300

6 600

Finished goods

11 000

14 500

For the year ended 30 April 2025

$

Revenue

389 400

Purchases of raw materials

30 200

Purchases returns of raw materials

5 800

Wages of factory operatives

62 100

Wages of factory supervisor

32 200

Wages of office supervisor

28 100

Factory general expenses

23 700

Office general expenses

15 600

Rent and rates

12 000

Factory equipment - at cost

200 000

Factory equipment - provision for depreciation

97 600

Additional information

  1. No non-current assets were sold or purchased during the year.

  2. Rent and rates are to be apportioned 3/4 to the factory and 1/4 to the office.

  3. Factory equipment is depreciated at 20% per annum using the reducing balance method.

  4. Wages $600 are owed to factory supervisor.

REQUIRED

Prepare the manufacturing account for the year ended 30 April 2025.

Fozia
Manufacturing Account for the year ended 30 April 2025

$

$

How did you do?

1b
Sme Calculator3 marks

Calculate Fozia's gross profit for the year ended 30 April 2025.

How did you do?

25 marks

Fozia opened a factory manufacturing wheelchairs on 1 May 2022. Fozia is considering reducing the number of wheelchairs she manufactures and instead buying in finished goods from a supplier.

REQUIRED

Advise Fozia whether she should start buying in finished goods from a supplier. Justify your answer by providing arguments for and against buying in finished goods and reducing the amount she manufactures.

How did you do?

3a
Sme Calculator10 marks

Yasmin opened a garment factory on 1 May 2016.

She provided the following information.

$

On 1 May 2016

     Cost of factory machinery

35 000

     Cost of office furniture and equipment

8 500

     Cost of tools

1 000

For the year ended 30 April 2017

Revenue

113 640

Purchases of raw materials

30 100

Purchases of finished goods

15 700

Wages and salaries

     Factory operatives

31 500

     Factory supervisors

11 860

     Office and sales staff

32 200

General expenses

     Factory

3 240

     Office

1 950

Rates

     Factory

4 500

     Office

1 500

At 30 April 2017

Inventory

     Raw materials

3 150

     Work in progress

2 820

     Finished goods

6 800

Value of tools

830

Wages accrued

11 860

     Factory operatives

800

     Office and sales staff

950

Additional information

  1. No additional non-current assets were purchased during the year.

  2. The factory machinery is to be depreciated at 20% per annum on cost.

  3. The office furniture and equipment is to be depreciated at 15% per annum on cost.

  4. The tools are to be revalued at the end of each financial year.

REQUIRED

Prepare the manufacturing account for the year ended 30 April 2017.

Yasmin
Manufacturing Account for the year ended 30 April 2017

$

$

How did you do?

3b
Sme Calculator4 marks

(i) Calculate the cost of sales for the year ended 30 April 2017.

(ii) Calculate the gross profit for the year ended 30 April 2017

How did you do?

45 marks

Yasmin opened a garment factory on 1 May 2016.

Yasmin is hoping to decrease her cost of production in the future. She thinks that if she spends a further $25 000 on factory machinery she will be able to reduce the costs of direct labour by one third.

REQUIRED

Advise Yasmin whether or not she should buy the extra factory machinery. Justify your answer with two advantages and two disadvantages of your advice.

How did you do?

5a
Sme Calculator10 marks

Salman owns a footwear factory. He sells to all of the three local shoe shops. Salman prepares his financial statements to 30 April each year.

At 30 April 2023, Salman’s ledger account balances included the following.

$

Inventory at 1 May 2022

      Raw materials

8 190

      Work in progress

15 200

      Finished goods

23 860

Purchases of raw materials

78 420

Purchases of finished goods

90 144

Wages

      Factory supervisor

27 500

      Factory operatives

52 396

Rates and insurance

17 528

Factory electricity

11 442

General factory expenses

8 244

Factory equipment – at cost

90 000

Factory equipment – provision for depreciation

43 920

Balance at bank

31 000 debit

Additional information

  1. Inventory at 30 April 2023

          Raw material

    8 000

          Work in progress

    16 100

          Finished goods

    24 590

  2. Salman applies a mark-up of 50% to his cost of sales.

  3. Rates and insurance are to be apportioned three quarters to the factory and one quarter to the office.

  4. At 30 April 2023, factory electricity of $1048 was unpaid.

  5. Factory equipment is depreciated at 20% per annum using the reducing balance method.

Prepare Salman’s manufacturing account for the year ended 30 April 2023.

Salman
Manufacturing Account for the year ended 30 April 2023

$

$

How did you do?

5b
Sme Calculator5 marks

Prepare the trading section of Salman’s income statement for the year ended 30 April 2023.

Salman
Income Statement (trading section) for the year ended 30 April 2023

$

$

How did you do?

5c5 marks

Salman is considering converting some of his office space into additional factory capacity.

Advise Salman whether he should convert some of his premises from office use to factory use. Justify your answer by providing arguments for and against this conversion of office space into additional factory capacity

How did you do?

6a
Sme Calculator11 marks

Hilary owns a manufacturing business. She has provided the following information.

$

Inventory at 1 August 2022

     Raw materials

9 100

     Work in progress

21 357

     Finished goods

24 235

For the year ended 31 July 2023

     Revenue

457 250

     Purchases of raw materials

110 000

     Purchases returns of raw materials

2 200

     Purchases of finished goods

23 500

     Purchases returns of finished goods

4 700

     Wages of factory operatives

91 665

     Wages of factory supervisor

29 000

     Wages of office supervisor

28 000

     Heat, light and power

11 600

     Rates and insurance

8 250

     Factory repairs and renewals

5 125

     Factory equipment – at cost

124 000

     Factory equipment – provision for depreciation

35 500

Additional information

  1. Inventory at 31 July 2023

Raw material

9 980

Work in progress

22 446

Finished goods

25 110

  1. Heat, light and power is to be apportioned 4/5 to the factory and 1/5 to the office.

  2. Rates and insurance is to be apportioned 3/5 to the factory and 2/5 to the office. Insurance of $4440 has been paid for the year to 31 December 2023.

  3. At 31 July 2023, a factory repair, $644, was unpaid and no adjustment had been made.

  4. Factory equipment is depreciated at 25% per annum using the reducing balance method.

REQUIRED

Prepare Hilary’s manufacturing account for the year ended 31 July 2023.

Hilary
Manufacturing Account for the year ended 31 July 2023

$

$

How did you do?

6b
Sme Calculator4 marks

Calculate Hilary’s gross profit for the year ended 31 July 2023.

How did you do?

6c5 marks

Hilary is considering stopping buying any finished goods for resale and instead increasing the production at her factory.

REQUIRED

Advise Hilary whether she should sell only production from her own factory and increase the amount produced. Justify your answer by providing arguments for and against selling only production from her own factory and increasing the amount produced.

How did you do?

7a
Sme Calculator11 marks

Sara owns a clothing factory. She sells the clothing to a small number of local shops. She allows 30 days credit.

At 30 September 2023, Sara’s ledger account balances included the following.

$

Inventory at 1 October 2022

    Raw materials

4 875

    Work in progress

8 125

    Finished goods

12 890

Purchases of raw materials

56 400

Wages

    Machine operators

43 300

    Factory supervisor

25 000

    Delivery vehicle driver

14 250

Rates and insurance

29 600

General factory expenses

9 650

Factory machinery – at cost

80 000

Factory machinery – provision for depreciation

35 000

Trade receivables

27 000

Cash at bank

1 050

Additional information

  1. Inventory at 30 September 2023

Raw material

5 110

Work in progress

7 365

Finished goods

13 725

  1. At 30 September 2023 general factory expenses of $335 were unpaid.

  2. Insurance of $8 000 had been paid for the year July 2023 to June 2024.

  3. Rates and insurance are to be apportioned equally
    between the factory and the office.

  4. Factory machinery is depreciated at 25% per annum using the reducing balance method

REQUIRED

Prepare Sara’s manufacturing account for the year ended 30 September 2023

Sara
Manufacturing Account for the year ended 30 September 2023

$

$

How did you do?

7b
Sme Calculator3 marks

Prepare the current assets section of Sara’s statement of financial position at 30 September 2023.

Sara
Statement of financial position (current assets section) at 30 September 2023

$

$

How did you do?

7c5 marks

Sara has now been asked to supply a local drama school with theatrical costumes. The drama school would place an order with Sara each month and would require 60 days credit.

REQUIRED

Advise Sara whether she should start supplying the drama school with costumes. Justify your answer by providing advantages and disadvantages of supplying the costumes.

How did you do?