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PRUDY MANUFACTURERS The information relates to the financial year ended 28 February 2021 - NSC Accounting - Question 2 - 2021 - Paper 2
Question 2
PRUDY MANUFACTURERS The information relates to the financial year ended 28 February 2021. The business produces one style of travelling bag. The owner is Prudy Sith... show full transcript
Worked Solution & Example Answer:PRUDY MANUFACTURERS The information relates to the financial year ended 28 February 2021 - NSC Accounting - Question 2 - 2021 - Paper 2
Step 1
Production Cost Statement
Answer
To compile the Production Cost Statement, we need to summarize the relevant costs incurred in the manufacturing process.
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Direct Material Cost: The raw materials issued to the factory for production amount to R1,494,000.
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Direct Labour Cost: The wages paid to production workers total R647,400.
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Factory Overhead Cost: The accounted factory overhead costs must be adjusted:
- Original Factory Overhead Cost: R520,280
- Adjust for the telephone error (R22,400): R520,280 - R22,400 = R497,880
- Adjust for rent (7/10 for factory): R98,400 * 0.7 = R68,880
- Adjust for insurance (60% related to factory): R26,400 * 0.6 = R15,840
- Total Adjusted Factory Overhead Cost = R497,880 + R68,880 + R15,840 = R582,600
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Total Production Costs: Sum of Direct Material, Direct Labour, and Adjusted Factory Overhead:
- Total Production Costs = R1,494,000 + R647,400 + R582,600 = R2,724,000
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Production Cost of Finished Goods: The production cost of finished goods is therefore R2,724,000.
Step 2
Abridged Statement of Comprehensive Income
Answer
For the Abridged Statement of Comprehensive Income:
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Sales: Total sales amount to R4,433,600.
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Cost of Sales: This includes total production costs of finished goods calculated earlier (R2,724,000).
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Gross Profit: This is calculated as Sales - Cost of Sales:
- Gross Profit = R4,433,600 - R2,724,000 = R1,709,600.
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Operating Expenses: These include Selling and Distribution (R224,960) and Administration costs (R187,760).
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Total Operating Expenses: Total = R224,960 + R187,760 = R412,720.
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Net Profit: This is derived as Gross Profit - Total Operating Expenses:
- Net Profit = R1,709,600 - R412,720 = R1,296,880.