CD Ltd, a company engaged in the manufacture of specialist marine engines, operates an historic job cost accounting system which is not integrated with the financial accounts.
At the beginning of May 1980 the opening balances in the Cost Ledger were:
During the month the following transactions took place:
£12,500 of the above gross wages were incurred on the construction of manufacturing equipment, £35,750 were indirect wages and the balance were direct. Production overheads: Actual amount incurred, excluding items shown above, was £152,350; £30,000 was absorbed by the manufacturing equipment under construction and under absorbed overheads written off at the end of the month amounted to £7,550. Royalty payments: One of the engines produced is manufactured under licence. £2,150 is the amount which will be paid to the inventor for the month's production of that particular engine. Selling Overheads: £22,000 Sales: £410,000. The company's gross prof it margin is 25% on factory cost. At the end of May stocks of work in progress had increased by £12,000. The manufacturing equipment under construction was completed within the month, and transferred out of the cost ledger at the end of the month. Required: Prepare the relevant control accounts, costing profit and loss account, and any other accounts you consider necessary to record the above transactions in the cost ledger for May 1980.