T2FIT MANUFACTURERS The business, owned by Mark Fit, manufactures T-shirts - NSC Accounting - Question 2 - 2023 - Paper 2

To calculate the factory overhead costs, we need to consider the following:

1. Incorrect Total: The original factory overheads were stated to be R600,000.

2. Indirect Material: R7,000 was omitted, thus:

   $ext{Indirect Material} = R600,000 - R7,000 = R593,000$

3. Water and Electricity:

   • Breakdown:
     • Office: 15% of R84,000 = R12,600
     • Selling and Distribution: 25% of R84,000 = R21,000
     • Factory: 60% of R84,000 = R50,400

4. Insurance: Adjust from R45,000 based on actual floor space used.

Putting together these values provides the corrected total for factory overheads of R570,650.

The Production Cost Statement is organized as follows:

1. Direct Material Costs: R888,300
2. Direct Labor Costs: (Input the given values)
3. Factory Overhead Costs: R570,650
4. Total Cost of Production = Direct Material Costs + Direct Labor + Factory Overhead Costs

The final total gives the overall production costs. Ensure to break down the components clearly.

Wastage of raw materials is calculated based on the units of fabric wasted. The calculation would consider the total amount of raw material consumed and the amount of fabric used effectively in production.

The formula is: $ext{Wastage Cost} = ext{Equivalent Fabric Wasted} imes ext{Cost per Meter}$

Substituting the numbers: $= (18,900 - (750 imes 1.2)) imes R47$ Calculating the wastage cost gives R42,300.

To address wastage of raw materials, Mark can consider the following strategies:

1. Enhance Staff Training: Regular training sessions can improve efficiency and reduce the likelihood of wastage due to errors, leading to better resource management.

2. Implement Regular Maintenance: Regular servicing of machines can prevent breakdowns that lead to material wastage, ensuring that production processes remain efficient.