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3.1 Choose a cost category from COLUMN B that matches the example in COLUMN A - NSC Accounting - Question 3 - 2024 - Paper 2
Question 3
3.1 Choose a cost category from COLUMN B that matches the example in COLUMN A. Write only the letter (A–D) next to the question numbers (3.1.1 to 3.1.3) in the ANSWE... show full transcript
Worked Solution & Example Answer:3.1 Choose a cost category from COLUMN B that matches the example in COLUMN A - NSC Accounting - Question 3 - 2024 - Paper 2
Step 1
3.2 Calculate the correct factory overhead cost:
Answer
To calculate the correct factory overhead cost, we start with the initially calculated amount of R258,200. Next, we need to make adjustments for the errors:
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Water and Electricity Expense: Let’s assume the omitted water and electricity expense is $x. According to the information given, 75% of this expense is allocated to the factory:
- Factory portion = $0.75x
- Administration portion = $0.25x
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Rent Expense Adjustment: The total recorded rent of R142,800 should be divided based on the floor area:
- Factor area proportion = 220/420 = 0.5238 → Factory share = R142,800 x 0.5238 ≈ R74,800
- Sales department share = R142,800 x (120/420) ≈ R40,800
- Administration share = R142,800 x (80/420) ≈ R26,400
- Corrected total rent = R74,800
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Insurance Adjustment: The insurance expense (R48,000) was allocated incorrectly:
- Correct ratio 5:2:1 results in:
- Factory share = R48,000 x (5/8) = R30,000
- Sales share = R48,000 x (2/8) = R12,000
- Admin share = R48,000 x (1/8) = R6,000
- Correct ratio 5:2:1 results in:
Using these adjustments, we compile:
- Initial overhead = R258,200
- Adjustments: (Water and electricity) + R28,000 (Rent) + R4,500 (Insurance)
- This brings the factory overhead cost to R223,500.
Step 2
3.3 Complete the Production Cost Statement:
Answer
To complete the Production Cost Statement for the financial year, we need the following components:
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Direct Material Cost: Includes the total fabric used in the factory, valued via FIFO method. The total fabric available for the factory was 70,000 meters, and 59,500 meters were issued, leading to a material cost derived from the stock and relevant purchases.
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Work-in-progress: Consider the opening balance at 29 Feb. 2024, which was R30,700.
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Factory Overhead Costs: Use the recalculated factory overhead of R223,500 from step 3.2.
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Total Manufacturing Costs: This is the sum of the direct material cost, work-in-progress, and factory overhead.
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Cost of Production: It would include the finished goods produced (20,200 uniforms) at a total of R79 each. Thus, finalizing the statement based on the gathered information.