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The following information relates to Moses Manufacturers, a small business that manufactures photo frames - English General - NSC Accounting - Question 5 - 2017 - Paper 1

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The following information relates to Moses Manufacturers, a small business that manufactures photo frames. The financial year ended on 30 April 2016. **Required:** ... show full transcript

Worked Solution & Example Answer:The following information relates to Moses Manufacturers, a small business that manufactures photo frames - English General - NSC Accounting - Question 5 - 2017 - Paper 1

Step 1

Prepare the Production Cost Statement for the year ended 30 April 2016.

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Answer

Production Cost Statement for the year ended 30 April 2016

Direct Material Cost Calculation:
Purchases of raw materials = R555 000
Less defective materials = R21 000

Direct Material Cost = R555 000 - R21 000 = R534 000

Direct Labour Cost:
Direct Labour Cost = R716 960

Factory Overhead Cost:
Factory Overhead Cost = R468 450

Total Manufacturing Cost Calculation:
Total Manufacturing Cost = Direct Material Cost + Direct Labour Cost + Factory Overhead Cost
= R534 000 + R716 960 + R468 450 = R1 719 410

Cost of Production of Finished Goods:
Cost of Production of Finished Goods = Number of Units Produced * Cost per Unit
= 39 000 * R45 = R1 755 000

Gross Profit:
Gross Profit = R1 250 000

Summary:

  • Direct Material Cost: R534 000
  • Direct Labour Cost: R716 960
  • Factory Overhead: R468 450
  • Total Manufacturing Cost: R1 719 410
  • Cost of Production of Finished Goods: R1 755 000
  • Gross Profit: R1 250 000

Step 2

Complete the abridged (shortened) Income Statement to calculate the net profit for the year ended 30 April 2016.

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Answer

Abridged Income Statement for the year ended 30 April 2016

Gross Profit:
Gross Profit = R1 250 000

Less:

  • Selling and Distribution Cost = R609 850
  • Administration Cost = R443 950

Net Profit Calculation:
Net Profit = Gross Profit - (Selling and Distribution Cost + Administration Cost)
= R1 250 000 - (R609 850 + R443 950)
= R1 250 000 - R1 053 800
= R196 200

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