Reference no: EM132522591

Sakala Manufacturing makes a single product. The following balances were extracted from the books at the end of the financial year on 31 December 2019:

Inventory at 1 January 2019:

Raw materials                                          17 500

Work in progress                                       24 000

Finished goods                                            50 000

Purchases of raw materials                             82 600

Carriage                                                      12 000

Production wages                                         75 000

Office wages                                              35 000

Sundry office expenses                                 14 500

Production manager's salary                          20 500

Factory rent, rates and power                       18 400

Royalties                                                   9 000

General factory expenses                           15 200

Premises maintenance                               40 000

Factory machinery (at cost)                         120 000

Factory machinery - provision for depreciation   70 000

Inventory at 31 December 2019:

Raw materials                               16 300

Work in progress                             29 000

Finished goods                               46 000

Additional information at 31 December 2019:

1. 60% of the carriage relates to raw materials and 40% to goods sold.

2. General factory expenses owing K400.

3. 70% of the maintenance relates to the factory premises and 30% to the office premises.

4. Factory machinery is depreciated at the rate of 15% per annum using the diminishing (reducing) balance method.

Required

Question (a) Prepare the manufacturing account for the year ended 31 December 2019. Clearly label the prime cost and cost of production.

Question (b) Explain the difference between direct cost costs and overheads.