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T2FIT MANUFACTURERS The business, owned by Mark Fit, manufactures T-shirts - NSC Accounting - Question 2 - 2023 - Paper 2
Question 2
T2FIT MANUFACTURERS The business, owned by Mark Fit, manufactures T-shirts. The financial year ended on 28 February 2023. REQUIRED: 2.1.1 Refer to Information A. ... show full transcript
Worked Solution & Example Answer:T2FIT MANUFACTURERS The business, owned by Mark Fit, manufactures T-shirts - NSC Accounting - Question 2 - 2023 - Paper 2
Step 1
Refer to Information A. Calculate the direct material cost.
Answer
To calculate the direct material cost, we can use the available information on raw materials. The total amount available for use was R958 800, and raw material issued to the factory was R888 300. The formula for direct material cost can be defined as:
Direct Material Cost = Total Amount Available - Closing Stock
Where:
- Total Amount Available = R958 800
- Closing Stock = R7 000
Thus, Direct Material Cost = R958 800 - R7 000 = R951 800
Step 2
Refer to Information B. Calculate the factory overhead costs for the year by completing the table in the ANSWER BOOK.
Answer
To calculate the factory overhead costs accurately, we first correct the errors in the previously calculated totals:
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Start with the original calculated overheads of R600 000.
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Add the omitted indirect material closing stock of R7 000.
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Accumulate the allocated water and electricity costs, which are:
- (15% + 25% + 60%) of R84 000 = R84 000 for factory overheads.
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Correct the insurance:
- Factory insurance should be allocated based on the floor space. Thus,
Total factory insurance = 45,000
Per factory space = (1500/(1500+300+600)) * 45000Calculate this and sum up all the costs to derive the corrected total factory overhead.
Step 3
Prepare the Production Cost Statement for the year ended 28 February 2023.
Answer
The Production Cost Statement can be prepared as follows:
- Direct Material Cost: R951 800
- Direct Labour Cost: Rxxx (will pull from further information if available)
- Factory Overhead Costs: Rxxx (will pull from previous calculation)
- Total Production Cost = Direct Material Cost + Direct Labour Cost + Factory Overhead Costs
Make sure to identify any additional costs that impact total production.
Step 4
Calculate the cost of the wastage of raw materials.
Answer
To calculate the wastage cost:
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Understand total raw materials issued: R888 300
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Calculate the wastage based on the total inches of fabric used and resulting T-shirts.
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Apply: Wastage Cost = Raw Material Issued - Maximum Utilizable Fabric Where:
Raw Material Issued = 18 900 m² + 6 400 m² + 7 000 m² + 7 000 m² - Closing Stock Result the total waste cost.
Step 5
Mark is concerned about the increase in the cost of raw materials over the financial year. Provide TWO strategies that Mark can use to address the problem of wastage.
Answer
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Implement Training Programs: To reduce wastage, Mark should train employees on efficient fabric cutting and machine usage to minimize material loss.
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Regular Machine Maintenance: Ensuring that machines are regularly serviced and maintained can prevent malfunctions that lead to increased wastage.