- Identify and explain concepts involved in manufacturing
- Be able to prepare notes used for production cost statement
- Be able to prepare production cost statement
- Calculate break even point
Sihle Sangweni owns two separate factories that manufacture products according to orders received. There is no work-in-progress stock. The year-end is 28 February.
1.1 Indicate whether the following statements are TRUE or FALSE. Write only 'true' or 'false' next to the question numbers (1.1.1 to 1.1.3) in the ANSWER BOOK.
1.1.1 Wages of factory cleaners is a direct labour cost.
1.1.2 Delivery costs of finished goods to retailers are a selling and distribution cost.
1.1.3 Depreciation on office equipment is an administration cost.
1.2 DESKS FACTORY
1.2.1 Complete the Factory Overhead Cost Note.
1.2.2 Calculate the total cost of production of finished goods.
1.2.3 Sihle wants to produce an additional 1 500 desks, while maintaining the selling price and costs. Calculate the additional profit he can expect.
Extract of pre-adjustment amounts on 28 February 2019 R
- Indirect labour 296 500
- Depreciation of factory plant 166 000
- Advertising 24 500
- Water and electricity 248 000
- Rent expense 345 600
- Insurance allocated to sales department 12 600 Factory sundry expenses 107 700
Adjustments to factory overheads for desks:
- Water and electricity for February 2019, R18 000, must be taken into account. 80% is allocated to the factory. The balance is an administration cost.
- Rent must be allocated according to floor area: Factory: 810 m 2 Office: 180 m 2 Sales department: 90 m 2
- 75% of insurance must be allocated to the factory. The balance applies to the sales department.
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