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5.1 Indicate whether the following statements are True or False - NSC Accounting - Question 5 - 2017 - Paper 1
Question 5
5.1 Indicate whether the following statements are True or False. Write only the answer next to the question numbers (5.1.1–5.1.3) in the ANSWER BOOK. 5.1.1 The sa... show full transcript
Worked Solution & Example Answer:5.1 Indicate whether the following statements are True or False - NSC Accounting - Question 5 - 2017 - Paper 1
Step 1
Calculate the direct labour cost.
Answer
To calculate the direct labour cost, we sum the normal time payment, overtime payment, and employer contributions.
- Normal time: 5 workers
- Normal time per worker: 1,800 hours/year
- Normal rate: R70/hour
Calculation:
Normal time cost = 5 imes 1,800 imes 70 = R630,000
- Overtime worked: 660 hours
- Overtime rate: 1.5 imes R70 = R105/hour
Calculation:
Overtime cost = 660 imes 105 = R69,300.
- Employer contributions: 9% of normal labour cost
Calculation:
Contributions = 630,000 imes 0.09 = R56,700
Total direct labour cost = R630,000 + R69,300 + R56,700 = R756,000.
Step 2
Refer to Information C: (a) Calculate (a) and (b) on the note for Factory Plant and Equipment.
Answer
To calculate (a), we find the depreciation expense based on the factory plant cost:
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Cost (1 January 2017) = R420,000
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Accumulated depreciation (1 January 2017) = R198,000
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Carrying value (1 January 2017) = R222,000
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Additions during the year = R76,000
Final Carrying Value Calculation:
Total Carrying Value = 660,000 + 76,000 - 436,000 = R300,000.
For (b):
- Sold 60,000 units at an accumulated depreciation = R62,850.
Step 3
Calculate the Cost of sales for the year ended 31 December 2017.
Answer
To calculate the Cost of Sales:
- Units sold: 29,500 jackets at a cost of R60 each.
- Cost of sales calculation:
Total cost = 29,500 imes R60 = R1,770,000
I will also factor the beginning inventory and ending inventory:
Cost of sales = (46,000 + 1,770,000 - 41,000 = 1,775,000).
Step 4
Do a calculation to prove that the break-even point for jackets in 2017 is correct.
Answer
To prove the break-even point (BEP) calculation for jackets:
- Fixed costs are R618,000
- Contribution margin per unit = Selling price per unit - Variable cost per unit.
- Selling price (R115) - Variable cost (R73) = R42.
So, the BEP calculation is:
BEP = Total Fixed Costs / Contribution Margin per Unit
BEP = R618,000 / R42 = approximately 14,714 units, which confirms the BEP point.
Step 5
Comment on the break-even points and the level of production for both products.
Answer
For jackets, the break-even point is higher, indicating that fewer units are needed to be produced relative to caps. The increase in production level for jackets from 10,362 to 14,715 shows a significant rise in production needs, indicating less profitability for jackets if production exceeds BEP.
For caps, the lower break-even and reduced production levels indicate better market stability and potential profits.
Step 6
Calculate the percentage increase in the selling price.
Answer
To find the percentage increase:
- Old price (R67.50)
- New price (R54.00)
Formula:
Percentage Increase = ((New Price - Old Price) / Old Price) imes 100
This calculation yields:
Percentage increase = ((54 - 67.50) / 67.50) imes 100 = 25%.
Step 7
Provide ONE reason why the owner felt it necessary to increase the selling price.
Answer
One reason the owner increased the selling price is due to operational costs not being met in 2016, leading the business to break even with minimal profit scenarios. This decision reflects the need for sustainable profit margins and potential reinvestment in the business.