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GEVEN MANUFACTURERS The business produces wooden tables - NSC Accounting - Question 2 - 2017 - Paper 1
Question 2
GEVEN MANUFACTURERS The business produces wooden tables. REQUIRED: Prepare the following for the year ended 28 February 2017: 2.1.1 Production Cost Statement 2.1.... show full transcript
Worked Solution & Example Answer:GEVEN MANUFACTURERS The business produces wooden tables - NSC Accounting - Question 2 - 2017 - Paper 1
Step 1
Production Cost Statement
Answer
To prepare the Production Cost Statement for the year ended 28 February 2017, we start by calculating the components:
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Calculate the Direct Material Cost: Direct Materials = Direct Materials + Payment adjustment = R1 050 000 + R102 000 = R1 152 000
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Determine Direct Labour Cost: After adjustments, from the information provided, assume direct labour cost is derived from the prime cost. Total Prime Cost = Direct Materials + Direct Labour + Factory Overheads R1 800 000 = R1 152 000 + Direct Labour + R487 200 Therefore, Direct Labour = R1 800 000 - R1 152 000 - R487 200 = R160 800
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Calculate Factory Overhead Adjustments: The Factory Overhead = R487 200 (no adjustments apply).
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Calculate Total Production Cost: Total Cost = Direct Material + Direct Labour + Factory Overheads Total Production Cost = R1 152 000 + R160 800 + R487 200 = R1 800 000
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Calculate Work in Process (Beginning & Ending): Beginning = R160 000 as given; End = R0 assumed based on adjustments.
The Production Cost Statement should look like this:
| Details | Amount |
|-------------------------------|----------|
| Direct Material Cost | R1 152 000 |
| Direct Labour Cost | R160 800 |
| Factory Overhead Cost | R487 200 |
| Total Production Cost | R1 800 000 |
| Work-in-Process (Begin) | R160 000 |
| Work in Process (End) | R0 |
| Total Cost of Production | R2 376 000 |
Step 2
Abridged Income Statement
Answer
To prepare the Abridged Income Statement for the year ended 28 February 2017, follow these steps:
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Calculate Sales Revenue: Sales = 8,000 tables * R510 = R4,080,000
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Calculate Cost of Goods Sold (COGS): COGS = Total Production Cost - Ending Inventory COGS = R2,376,000 - R0 = R2,376,000
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Calculate Gross Profit: Gross Profit = Sales - COGS = R4,080,000 - R2,376,000 = R1,704,000
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Calculate Other Expenses: Other Expenses = Administration + Selling & Distribution = R148,400 + R422,000 = R570,400
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Calculate Net Profit: Net Profit = Gross Profit - Other Expenses = R1,704,000 - R570,400 = R1,133,600
The Abridged Income Statement would appear as follows:
| Details | Amount |
|-------------------------------|-----------|
| Sales | R4,080,000 |
| Cost of Goods Sold (COGS) | R2,376,000 |
| Gross Profit | R1,704,000 |
| Other Expenses | R570,400 |
| Net Profit | R1,133,600 |