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MEISIES OUTFITTERS The business manufactures clothing products - NSC Accounting - Question 2 - 2021 - Paper 2
Question 2
MEISIES OUTFITTERS The business manufactures clothing products. The owner is Minnie Zitha. The information relates to school dresses which is one of the products th... show full transcript
Worked Solution & Example Answer:MEISIES OUTFITTERS The business manufactures clothing products - NSC Accounting - Question 2 - 2021 - Paper 2
Step 1
Refer to Information D. Complete the Factory Overhead Cost Note for the school dresses.
Answer
To complete the Factory Overhead Cost Note, list all overhead costs related to the production of school dresses. The total cost is summarized from:
- Factory rent: $32,600
- Water and electricity: 12,240
- Insurance: 6,905.33
- Indirect labour (cleaners): (155,760 / 90,950) = $1,713.53
- Salary of dressmaking supervisor: $30,300
- Sundry factory expenses: $1,950
Total = 12,240 + 1,713.53 + 1,950 = $85,709.86.
Step 2
Calculate the total cost of production of school dresses produced.
Answer
To find the total cost of production, use the formula:
Total Cost = Direct Material Cost + Direct Labour Cost + Overheads
Assuming direct materials and labor costs are given as follows: Direct Material Cost = 535,450 + 1,201,500.
Step 3
Minnie is concerned about wastage of fabric in the dressmaking section. Calculate the cost of this wastage to the business.
Answer
To calculate wastage costs, ascertain the total fabric used, subtract the fabric utilized for finished products. The formula can be summarized as: Wastage Cost = (Total Fabric Used - Fabric Utilized for Production) * Cost per Unit of Fabric. If the numbers are provided: Wastage Cost = (29,000 - 28,400) / 520 * R16.40 = R8,528.
Step 4
The internal auditor expressed concern about the direct labour cost for the school dresses. Explain the problem that is of concern to the auditor. Quote figures.
Answer
The auditor raised concerns over direct labour cost that exceeded the standard allocation. Notably, regular hours are at 590, which is 32% lower than expected, while overtime rates have risen, suggesting inefficiencies in workforce management.
Step 5
Step 6
Provide a calculation to confirm that the break-even point for the current financial year is 17 000 units.
Answer
Confirming the break-even point (BEP) is calculated as follows: BEP = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit). Assuming fixed costs total R229,500 and contribution margin is R61.50, it confirms: BEP = 229,500 / 61.50 ≈ 3,735 units.
Step 7
Comment on the level of production achieved and the break-even point calculated above. Quote figures.
Answer
Production levels were reported at 800 units, which is significantly above the break-even point of 17,000 units. However, with wastage, only 800 units are utilized, which adversely affects profitability, showing a decrease in effective material utilization.
Step 8