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1.1.1 Bad debts are an administration cost - NSC Accounting - Question 1 - 2018 - Paper 1
Question 1
1.1.1 Bad debts are an administration cost. 1.1.2 Indirect labour is a factory overhead cost. 1.1.3 Rent expense is a fixed cost. 1.2 KRIGE SHIRTS The business man... show full transcript
Worked Solution & Example Answer:1.1.1 Bad debts are an administration cost - NSC Accounting - Question 1 - 2018 - Paper 1
Step 1
1.2.1 Calculate direct labour cost.
Answer
To calculate the direct labour cost, we need to account for all the workers' normal wages and bonuses:
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Calculate the normal wages for each worker:
Normal wages per worker = Normal time expected × Normal rate
= 1 960 hours × R90/hour = R176 400
Since there are 4 workers:
Total normal wages = 4 × R176 400 = R705 600
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Calculate bonuses:
Bonus = 12% of Normal wages = 12% × R705 600 = R84 672
One worker's bonus = R12 146 (already provided).
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Total direct labour cost:
Direct labour cost = Total normal wages + Total bonuses = R705 600 + R84 672 = R756 272.
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Correct for the worker with reduced hours:
Total wages for the worker who worked less:
Wages for reduced hours = 1 680 hours × R90/hour = R151 200.
Update total bonuses:
Total direct labour cost = R 756 272 - (R176 400 - R151 200) + R12 146 = R756 050.
Step 2
1.2.2 Production Cost Statement for the year ended 31 July 2018.
Answer
Production Cost Statement
| Cost Description | Amount (R) |
|---|---|
| Direct material cost | 528 300 |
| Direct labour cost | 756 050 |
| Prime cost | 1 284 350 |
| Factory overhead cost | 360 880 |
| Total production cost | 1 645 230 |
| Work-in-progress (1 August 2017) | 35 570 |
| Work-in-progress (31 July 2018) | (x) |
| Cost of production of finished goods | 1 662 800 |