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Calculate the following for the Production Cost Statement: Direct material cost Direct labour cost Factory overhead cost Complete the Abridged Statement of Comprehensive Income (Income Statement) for the year ended 31 March 2022. - NSC Accounting - Question 2 - 2022 - Paper 2
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Calculate the following for the Production Cost Statement: Direct material cost Direct labour cost Factory overhead cost Complete the Abridged Statement of Compr... show full transcript
Worked Solution & Example Answer:Calculate the following for the Production Cost Statement: Direct material cost Direct labour cost Factory overhead cost Complete the Abridged Statement of Comprehensive Income (Income Statement) for the year ended 31 March 2022. - NSC Accounting - Question 2 - 2022 - Paper 2
Step 1
Direct material cost
Answer
To calculate the direct material cost, we need to determine the total fabric required for production.
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Each suit requires 3.2 metres of fabric, and for a production target of 3,000 suits:
Total fabric required = 3,000 suits * 3.2 metres/suit = 9,600 metres
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We account for a 5% wastage:
Total fabric issued = 9,600 metres * (1 + 0.05) = 10,080 metres
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The cost of fabric is given as R512,500. Since 12,250 metres were purchased for R512,500:
Cost per metre = R512,500 / 12,250 = R41.84
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Now, calculate the direct material cost:
Direct material cost = Total fabric issued * Cost per metre = 10,080 metres * R41.84 = R421,267.00.
Step 2
Direct labour cost
Answer
To calculate the direct labour cost, we need to determine the total cost of the factory workers:
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Based on the information provided:
- Factory machinists: 40 employees with a basic salary of R9,800 each.
- Factory supervisors: 1 employee with a basic salary of R17,500.
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The total direct labour cost will include the workers' bonuses:
- Total direct salaries = (40 * R9,800) + (1 * R17,500) = R392,500 + R17,500 = R410,000
- Bonus calculation: 11% of Gross Wage (Gross Wage is the above total).
- Bonus = 11% of R410,000 = R45,100
- Thus, direct labour cost = R410,000 + R45,100 = R455,100.
Step 3
Factory overhead cost
Answer
To determine the factory overhead cost, we first sum all overhead expenses associated with running the factory:
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Include costs like consumable stores, electricity, and insurance:
- Consumable stores = R35,700
- Factory overheads (additional) = R1,327,260
- Insurance = R102,060
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Thus, total factory overhead cost = Consumable stores + other overheads + Insurance = R35,700 + R1,327,260 + R102,060 = R1,464,020.
Step 4
Abridged Statement of Comprehensive Income
Answer
For the Abridged Statement of Comprehensive Income (Income Statement), we follow the standard format:
- Calculate the Sales:
- Cost of Sales = Total production costs + All costs incurred.
- Gross Profit = Sales - Cost of Sales.
- Operating Expenses = Selling & Distribution Costs + Administrative costs.
- Net Profit = Gross Profit - Operating Expenses.
- For clarity and accuracy, utilize all figures obtained from earlier calculations to provide the final Abridged Statement.