Reference no: EM131940093

Mr Len Naidoo, the owner of Widget Distributors, has in the past imported widgets. However, from 1 January 20x8, he decided to manufacture the widgets himself.

Here is the abridged statement of financial position of Widget Distributors at 31 December 20x7: Capital - Len Naidoo 2 000 Inventory (1 000 units) 800 Accounts payable 1 000 Accounts receivable 700 Bank 1 500 3 000 3 000 Page 20 of 21 From a scrutiny of vouchers and other documents you find that these transaction have taken place during the year ended 31 December 20x8:

1. Cash transaction as per the cash book: Receipts: Capital introduced by Mr Naidoo R10 000 Accounts receivable R6 000 Cash sales R2 000 Payments: Accounts payable R7 000 Drawings- Mr Naidoo R2 500 Wages paid to manufacturing staff R3 000 Rent for factory R1 200 Hire of specialised machinery R1 300

2. Amount owing, totalling R3 500 were written off as bad debts.

3. 5 500 units were sold.

4. A royalty of 10 cents per completed unit manufactured during the year is payable in arears on 1 January of the following year.

5. In addition, the following balance at 31 December 20x8 were determined:

Accounts payable - raw material R3 500 

Accounts receivable - trade debtors R1 200

Inventory: Finished goods (4 500 units) R?

Work - in - progress (2 000 units) R? ? Raw material R2 500

6. Inventory is valued at factory cost using the first - in first - out basis.

7. Work - in - progress at 31 December 20x8 was 75% complete in respect of raw material, and 45% complete in respect of direct labour and overheads.

You are required to:

1) Prepare the statement of the cost of goods manufactured for Widget distributors for the year ended 31 December 20x8.

2) Calculate the gross profit of Widget Distributors for the year ended 31 December 20x8.