Toyah owns a factory which makes dolls' houses. Her financial year end is 31 January. At 31 January 2024, her ledger accounts included the following balances. Inventory at 1 February 2023 Raw materials $12400 Work in progress $16970 Finished goods $14825 Revenue $390100 Purchases of raw materials $143000 Wages Factory operatives $51000 Factory supervisor $19000 Sales staff $30000 Factory electricity $16000 Rates and insurance $16200 General factory expenses $6155 Factory machinery – at cost $120000 Factory machinery – provision for depreciation $52500 Additional information 1. Inventory at 31 January 2024 Raw material $11205 Work in progress $17682 Finished goods $13480 2. Rates and insurance are to be apportioned 2/3 to the factory and 1/3 to the office. 3. At 31 January 2024, general factory expenses of $235 were unpaid. 4. Factory machinery is depreciated at 25% per annum using the reducing balance method. REQUIRED

Mark scheme

Marking points from the official mark scheme (May/June 2024). The mark or mark type is shown in brackets.

1. [9] Toyah Manufacturing Account for the year ended 31 January 2024
2. [9] Cost of material consumed
3. [9] Opening inventory of raw material 12 400
4. [9] Purchases of raw material 143 000
5. [9] 155 400
6. [9] Less Closing inventory of raw material 11 205
7. [9] 144 195 (1)
8. [9] Direct wages 51000 (1)
9. [9] Prime cost 195 195 (1)OF
10. [9] Factory overheads
11. [9] Wages of factory supervisor 19 000
12. [9] Factory electricity 16 000
13. [9] Rates and insurance (16200 × 2/3) 10 800 (1)
14. [9] General factory expenses (6 155 + 235) 6390 (1)
15. [9] Depreciation of factory machinery (120 000 – 52 500) × 25% 16875 (1)
16. [9] 69 065
17. [9] 264 260 (1)OF
18. [9] Add Opening work-in-progress 16 970
19. [9] 281 230
20. [9] Less Closing work-in-progress 17682 *(1) for both
21. [9] Cost of production 263 548 (1)OF
22. [5] Toyah Income statement (trading section) for the year ended 31 January 2024
23. [5] Revenue 390 100 (1)
24. [5] Cost of sales
25. [5] Opening inventory 14 825
26. [5] Cost of production 263 548 (1)OF
27. [5] 278 373
28. [5] Closing inventory 13480 *(1) for both
29. [5] 264 893 (1)OF
30. [5] Gross profit 125 207 (1)OF
31. [1] $263548 OF / 6936 = $38 (1)OF per dolls' house (rounded up to nearest dollar)
32. [5] For:
33. [5] Sales of discounted inventory should be profitable / make a profit / increase profit margin (1)
34. [5] Selling extra inventory may increase total sales / more customers / more revenue (1)
35. [5] Completed inventory may be turned into cash quickly (1)
36. [5] Her own inventory of finished goods has decreased so there may be scope for her to sell additional inventory (1)
37. [5] Accept other valid points
38. [5] Max (2)
39. [5] Against:
40. [5] Does not have enough money to buy the inventory (1)
41. [5] If have to borrow money will incur interest charges (1)
42. [5] It may incur extra storage costs (1)
43. [5] May not be able to sell the inventory if unpopular / inferior quality (1)
44. [5] May increase selling costs (1)
45. [5] Accept other valid points
46. [5] Max (2)
47. [5] Recommendation (1)