The Harvest Manufacturing Company owns a factory that manufactures waterproof footwear. The given is a summary of the transaction of the company throughout the financial year ending 31 May 2008.

The value of opening stocks of raw materials:              

                    Rs.
  Rubber      16225
  Linings       2950  
  Glue            325

Purchase of raw materials:
                    Rs.
  Rubber    162120
  Linings      14025  
  Glue            800

Factory expenses:

a) Wages of production workers, 6,300 man hours at Rs. 3 per man hour.

b) Hire of special moulds (a direct expense), Rs. 1,500.

c) Rent and rates Rs. 14, 501 (three seventeenths of the total is for an office building).

d) Non productive labor, Rs. 16, 480.

e) Light, Heat and Power, Rs. 18, 500 (This comprises a payment of Rs. 700 that relates to the following year.)

f) Depreciation is computed at Rs. 2.50 per machine-hour. (Records show that 6 machines have been used for 6 hrs per day for two hundred and fifty days throughout the year.)

g) Sundry factory expenses, Rs. 9, 400.

At 31 May 2008 raw materials were:
                     Rs.
Rubber      30880
Linings       3135  
Glue            150

Work in progress was valued at Rs. 24, 500 at the beginning of the year and Rs. 35, 302 at the end of the year.

47, 500 pairs of boots were sold in the year for a total of Rs. 750, 000. The opening stock of finished boots was valued at Rs. 40, 000 (12, 000 pairs) and the closing stock at Rs. 90, 000 (27, 000 pairs).

Required:

problem 1:

a) A manufacturing account and trading account for the year ending 31 May 2008.

b) A computation of the production cost of one pair of boots.

problem 2: A footwear retailer has offered the Company a special order for 20, 000 pairs. Illustrate two matters which should be considered before deciding whether to accept the order.