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2.2 STAR WHEELS MANUFACTURERS You are provided with information relating to Star Wheels Manufacturers for the year ended 31 December 2015 - NSC Accounting - Question 2 - 2016 - Paper 1
Question 2
2.2 STAR WHEELS MANUFACTURERS You are provided with information relating to Star Wheels Manufacturers for the year ended 31 December 2015. The business manufactures... show full transcript
Worked Solution & Example Answer:2.2 STAR WHEELS MANUFACTURERS You are provided with information relating to Star Wheels Manufacturers for the year ended 31 December 2015 - NSC Accounting - Question 2 - 2016 - Paper 1
Step 1
Prepare the following notes to the Production Cost Statement: Direct labour cost
Answer
To calculate the Direct Labor Cost:
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Basic Salary: Calculated as follows:
- Number of Employees: 14
- Monthly Salary per Employee: R7,000
- Annual Basic Salary = 14 employees × R7,000 × 12 months = R1,176,000
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Overtime: Total overtime hours per employee = 144 hours
- Overtime Rate per Hour: R65
- Total Overtime Cost = 14 employees × 144 hours × R65 = R1,188,000
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UIF Contributions: 1% of Basic Salary = R1,176,000 × 1% = R11,760
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Total Direct Labor Cost: R1,176,000 + R1,188,000 + R11,760 = R1,317,760
Step 2
Prepare the following notes to the Production Cost Statement: Factory overhead cost
Answer
To calculate the Factory Overhead Cost:
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Indirect Materials: R15,100
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Salaries: Foreman = R156,000
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Utilities (Electricity and Water): R104,000 × 12 months = R1,248,000
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Rent Expense: R115,200 × 12 months / 500 = R2,304
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Insurance: R4,200 × 3 = R12,600
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Depreciation: Factory Plant and Machinery = R277,200
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Total Factory Overhead Cost: R15,100 + R156,000 + R1,248,000 + R2,304 + R12,600 + R277,200 = R1,711,204
Step 3