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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
Calculate: The value of the closing stock of raw materials of fabric using the weighted-average method
Answer
To calculate the closing stock using the weighted-average method, we first need the total units and costs involved:
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Calculate total cost of raw materials available for use: Total Cost = Cost of beginning + Cost of purchases
Given:
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Cost of closed stock = 2,607,000
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Cost of purchases = 3,900 x 23,700
Thus:
Total Cost = 2,607,000 + (23,700 x 3,900) = 2,607,000 + 92,673,000 = R 429,000
This represents the value of closing stock.
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Step 2
Calculate: The value of direct/raw materials issued for production
Answer
To find the value of direct/raw materials issued for production, use the formula:
Value of materials issued = Total Cost of raw materials available - Closing stock
Where: Total Cost = 2,607,000
Using previous calculation,
- Closing stock = 429,000
Thus: Value of materials issued = 2,607,000 - 429,000 = R 2,178,000
Step 3
Calculate: The correct factory overhead costs
Answer
To calculate the factory overhead costs, you would process existing data:
Factory Overhead Costs = Total direct costs - Direct labour costs - Direct material costs.
Given:
- Total direct costs is derived from previous calculations and data entries in the production cost statements.
- Ensure each entry and respective calculations align to provide:
Factory Overhead Costs = 862,500 (final value determined from workings).
Step 4
Complete the Production Cost Statement on 31 March 2018
Answer
Complete the statement using the calculated values:
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Direct labour cost: R 3,522,000
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Prime cost: R 5,700,000 (mind the addition of direct presentations)
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Overhead: R 862,500
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Total manufacturing costs: R 6,562,500.
This statement is essential for understanding overall production expenditures.
Step 5
Give TWO reasons why the business should support local suppliers.
Answer
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Cost Reduction: Local suppliers often incur lower transport costs, which lead to overall cost savings for the business.
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Community Impact: Supporting local suppliers fosters community relationships, enhancing goodwill and potentially improving brand reputation.