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ACC00714 | Managerial Accounting Major Assignment | Accounts

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Surf N Sea manufactures swimwear and beach accessories for men and women. They operate out of rented premises in Kirra where the factory is split into a manufacturing and storage area and retail space.

The business produces 4 products:

• One-piece swimsuits for women

• Board shorts for men

• Beach Towels

• Beach Umbrellas

Inventory:  At the end of each month the business plans to have 50% of the following month’s sales units in stock as finished goods and 75% of the direct materials required for the next month’s production.  

Cash Collections:  20% of sales are through the retail outlet at the factory.  These customers pay for their purchases at the time of sale.  The remainder of sales is to businesses that resell Surf N Sea products. Credit is extended to all business customers.  It is estimated 60% of these sales are collected in the month of sale and the remaining 40% are collected in the following month. 

Cash Payments:  All purchases, other than the purchase of direct materials, are paid at the time the expense is incurred.  It is estimated 30% of accounts payable will be paid in the month the direct materials are purchased and the remaining 70% will be paid in the following month. 

The interest rate payable on the loan is 9% per annum.  Interest is paid monthly.  The loan is on an interest-only basis and the principle can be repaid at any time.

Depreciation of plant and equipment totals $10,000 for the year.  Depreciation is recorded monthly.

Repairs and maintenance related to manufacturing plant and equipment are estimated to be $1,500 each quarter payable in March, June, September, and December.

Variable manufacturing overhead is allocated based on machine hours. Fixed manufacturing overhead is allocated based on units of production. Ignore GST and Income Tax.  Round amounts other than unit costs to nearest dollar value.

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