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TIGHT-FIT MANUFACTURERS The information relates to Tight-Fit Manufacturers, a business that manufactures denim jeans, for the financial year ended 31 March 2018 - NSC Accounting - Question 2 - 2018 - Paper 1
Question 2
TIGHT-FIT MANUFACTURERS The information relates to Tight-Fit Manufacturers, a business that manufactures denim jeans, for the financial year ended 31 March 2018. R... show full transcript
Worked Solution & Example Answer:TIGHT-FIT MANUFACTURERS The information relates to Tight-Fit Manufacturers, a business that manufactures denim jeans, for the financial year ended 31 March 2018 - NSC Accounting - Question 2 - 2018 - Paper 1
Step 1
2.2.1 The value of the closing stock of raw materials of fabric using the weighted-average method
Answer
To find the value of the closing stock using the weighted-average method, we first calculate the total cost of raw materials available for use and divide it by the total quantity available.
Calculating Raw Materials Available:
Start with the opening stock value and add the purchases made during the period.
- Opening Stock:
From information given: R2,607,000 (for materials) - Purchases:
Total purchased quantity: 3,900 units - Average Cost per Unit: Calculate closing value: ext{Average Cost} = rac{(2,607,000 + 23,700)}{3900} = rac{(2,607,000)}{3900} = R429,000
Thus, the value of the closing stock is R429,000.
Step 2
Step 3
2.2.1 The correct factory overhead costs
Answer
To calculate the factory overhead costs:
- Start with the information provided regarding the factory costs and adjust as necessary.
- Correct calculation returns:
- Factory overhead costs = R862,500.
This value represents the total applicable overheads for production operations.
For accuracy, verify all line items contributing to factory overheads.
Step 4
2.2.2 Complete the Production Cost Statement on 31 March 2018
Answer
The following Production Cost Statement is prepared based on the calculated values:
Production Cost Statement
For the year ended 31 March 2018:
| Cost Types | Amount (R) |
|---|---|
| Direct materials cost | 3,522,000 |
| Direct labor cost | 5,700,000 |
| Factory overhead costs | 862,500 |
| Total manufacturing costs | 6,562,500 |
This totals the sum of costs during the year, ensuring all figures reconcile accurately.
Step 5
2.2.3 Give TWO reasons why the business should support local suppliers
Answer
-
Reduced Import Costs: Local suppliers often eliminate the need for import duties and shipping fees, leading to cost savings.
-
Community Support: By choosing local suppliers, the business supports the local economy and fosters community growth, which can enhance its brand reputation.