WEZA STITCHES Weza Stitches, owned by Annie Brown, manufactures bathroom towel sets. Annie buys fabric from local suppliers. There information relates to the financial year ended 30 June 2022. Note that there were no work-in-progress stock balances. REQUIRED: 1.2.1 Calculate the following for the financial year ended 30 June 2022: - Direct labour cost - Factory overhead cost - Total cost of production 1.2.2 Annie is concerned that fixed costs increased to R806 400. Explain why she should not be concerned. Provide TWO points. 1.2.3 Refer to Information C. Comment on whether the production staff deserves the production bonus that they received. Provide THREE points, with figures. 1.2.4 Annie wants to improve her profit by R50 000 during the next financial year while maintaining costs. Calculate the additional units that must be produced to achieve this target.

NSC Accounting Important concepts of manufacturing: WEZA STITCHES Weza Stitches, ow

WEZA STITCHES Weza Stitches, owned by Annie Brown, manufactures bathroom towel sets - NSC Accounting - Question 1 - 2022 - Paper 2

Question 1

WEZA STITCHES Weza Stitches, owned by Annie Brown, manufactures bathroom towel sets. Annie buys fabric from local suppliers. There information relates to the financ... show full transcript

Worked Solution & Example Answer:WEZA STITCHES Weza Stitches, owned by Annie Brown, manufactures bathroom towel sets - NSC Accounting - Question 1 - 2022 - Paper 2

Step 1

1.2.1 Calculate the following for the financial year ended 30 June 2022: Direct labour cost

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Answer

To calculate the direct labour cost, we need to determine the total hours worked and the hourly rate:

Total hours worked = 6 workers × 1,840 hours = 11,040 hours
Hourly rate = R40
Thus, Direct Labour Cost = Total Hours × Hourly Rate = 11,040 × R40 = R441,600.

Step 2

1.2.1 Calculate the following for the financial year ended 30 June 2022: Factory overhead cost

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Answer

The actual factory overhead cost needs adjustment due to errors. The corrected total should account for the reallocation of the insurance and other overheads:

Corrected Factory Overhead Cost = R541,600 (original) - (R32,500 (insurance) - R32,500) + R54,000 (utilities) = R541,600 - R32,500 + R54,000 = R563,100.

Step 3

1.2.1 Calculate the following for the financial year ended 30 June 2022: Total cost of production

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Answer

Total Cost of Production = Direct Labour Cost + Factory Overhead Cost + Direct Material Cost
= R441,600 + R563,100 + R652,800 = R1,657,500.

Step 4

1.2.2 Explain why she should not be concerned. Provide TWO points.

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Answer

Fixed costs can be a sign of growth, indicating investments in capacity and future profitability.
As long as the fixed costs are covered by a sufficient sales volume, they do not pose a risk to the business.

Step 5

1.2.3 Comment on whether the production staff deserves the production bonus that they received. Provide THREE points, with figures.

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Answer

Production Increased: Production rose from 5,250 to 6,400 units, which translates to an increase of 1,150 units or 21.9%.
BEP Decrease: The break-even point decreased from 6,954 to 6,156 units, a drop of 11.5%, indicating better performance.
Direct Material Cost Reduction: The direct material cost per unit decreased from R128 to R102, a 20.3% reduction. This showcases efficiency improvements.

Step 6

1.2.4 Calculate the additional units that must be produced to achieve the profit target.

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Answer

To improve profit by R50,000 with a selling price of R375 and current profit margin per unit of R131:

Additional Units Needed =

rac{R50,000}{R375 - R244} = rac{R50,000}{R131} ext{ units} ext{ = } ext{382 units (rounded up)}.

WEZA STITCHES Weza Stitches, owned by Annie Brown, manufactures bathroom towel sets - NSC Accounting - Question 1 - 2022 - Paper 2

Worked Solution & Example Answer:WEZA STITCHES Weza Stitches, owned by Annie Brown, manufactures bathroom towel sets - NSC Accounting - Question 1 - 2022 - Paper 2

1.2.1 Calculate the following for the financial year ended 30 June 2022: Direct labour cost

1.2.1 Calculate the following for the financial year ended 30 June 2022: Factory overhead cost

1.2.1 Calculate the following for the financial year ended 30 June 2022: Total cost of production

1.2.2 Explain why she should not be concerned. Provide TWO points.

1.2.3 Comment on whether the production staff deserves the production bonus that they received. Provide THREE points, with figures.

1.2.4 Calculate the additional units that must be produced to achieve the profit target.

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