Total Rs. 22500/-
Less Finished goods Inventory Rs. 6750/- Rs. 15750/-
(3000 units @ Rs. 2.25) Gross Profit Rs. 19250/-
Less selling & administration expenses Rs. 18000/-
Net Profit Rs. 1250/- Disturbed by low profit M.D of the industries asked you to check the statement. Your examination revealed that the following manufacturing cost were included in
selling & administrative expenses: Heat light & Power Rs. 500/-
Salary of foreman Rs. 4000/-
Tax on Factory Building Rs. 400/-
Depreciation of Machinery Rs. 2600/- There was no ending inventory of work in process. You are required to prepare a revised income statement and explain the reasons of variation with the help of
working notes.