2.1.1 Prepare the Production Cost Statement - NSC Accounting - Question 2 - 2020 - Paper 2

To prepare the Production Cost Statement for Perfect Fit Manufacturers for the year ended 28 February 2021, we will follow these steps:

1. Identify Direct Costs:

   • Direct material cost: R1,575,000
   • Direct labour cost: R900,000

2. Calculate Adjustments:

   • Add the R75,000 for Quick Deliveries that was previously misallocated to the correct cost.

   • Total direct costs:

     $$ext{Total Direct Costs} = ext{Direct Material Cost} + ext{Direct Labour Cost} + ext{Transport Cost}$$

     ext{Total Direct Costs} = R1,575,000 + R900,000 + R75,000 = R2,550,000

     $$$$

3. Identify Factory Overhead Costs:

   • Factory overhead cost as perceived: R516,000

   • Add R117,600 as corrected for water and electricity to adjust:

     $$ext{Total Factory Overhead Cost} = R518,800 + R117,600 = R636,400$$

4. Calculate Total Manufacturing Costs:

   $$ext{Total Manufacturing Cost} = ext{Total Direct Costs} + ext{Total Factory Overhead Cost}$$

   ext{Total Manufacturing Cost} = R2,550,000 + R636,400 = R3,186,400

5. Work-in-progress:

   • The beginning Work-in-Progress: R230,000 (the end is adjusted as later).
   • Ending Work-in-Progress: Adjusting costs and including work without errors leads to calculated end cost based of adjustments.

6. Total Cost of Production:

   $$ext{Total Cost of Production} = ext{Total Manufacturing Costs} - ext{Ending Work-in-Progress}$$

   ext{Total Cost of Production} = R3,186,400 - (R104,000) = R3,082,400

Thus, the Production Cost Statement details the necessary costs and correct allocations relevant for the year.