LADOO MANUFACTURERS
The business manufacturers leather purses - NSC Accounting - Question 3 - 2023 - Paper 2
Question 3
LADOO MANUFACTURERS
The business manufacturers leather purses. The financial year ended on 28 February 2023.
REQUIRED:
3.1.1 Refer to Information C.
Calculate the... show full transcript
Worked Solution & Example Answer:LADOO MANUFACTURERS
The business manufacturers leather purses - NSC Accounting - Question 3 - 2023 - Paper 2
Step 1
Calculate the factory overhead cost.
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Answer
To calculate the factory overhead cost, we need to include the omitted costs and correct the errors:
Insurance:
Calculated as:
rac{2}{3} imes R235,950 = R157,300
Water and Electricity:
Total allocated costs:
extTotal=R69,200+R242,200=R311,400
Rent Correction:
The rent expense of R316,000 should be allocated as per the ratio 5:2:1:
Factory portion:
rac{5}{8} imes R316,000 = R197,500
Total Factory Overhead Cost:
Calculating final factory overhead cost:
R2,638,600+R157,300+R311,400+R197,500=R3,304,800
Thus, the factory overhead cost after corrections is R3,304,800.
Step 2
Prepare the Production Cost Statement on 28 February 2023.
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Answer
To prepare the Production Cost Statement, we will structure it step by step:
1. Direct Material Cost:
Total Direct Material Cost calculated as:
extDirectmaterialcost=R6,000,000−(R1,142,000+R3,304,800)=R2,553,200
2. Direct Labour Cost:
Total Direct Labour Cost:
=extNumberofworkersimesextNormalwagerateimesextNormalhoursworked
Or using overtime included
=40imesR60imes1920+R1,142,000=R5,500,000
3. Prime Cost Calculation:
Prime Cost = Direct Material + Direct Labour
=R2,553,200+R5,500,000=R8,053,200
4. Factory Overhead Cost:
Factory Overhead Cost from previous calculation:
=R3,304,800
5. Total Manufacturing Cost:
Total Manufacturing Cost:
=extPrimeCost+extFactoryOverheadCost=R8,053,200+R3,304,800=R11,358,000
6. Work-in-Progress at End of the Year:
Work-in-progress: R542,000
7. Cost of Production of Finished Goods:
Total cost of production:
=extTotalManufacturingCost−extWork−in−progress=R11,358,000−R542,000=R10,816,000
Thus, the Production Cost Statement is structured with all relevant calculations included.
