NSC Accounting Production Cost Statement: 3.1 Choose a cost category from

Question

3.1 Choose a cost category from COLUMN B that matches the example in COLUMN A. Write only the letter (A–D) next to the question numbers (3.1.1 to 3.1.3) in the ANSWER BOOK.

COLUMN A                       COLUMN B
3.1.1 Delivery expenses       A factory overhead
3.1.2 Office stationery       B selling and distribution
3.1.3 Salary of the factory supervisor  C direct material
                                   D administration

NARDO MANUFACTURERS

The business manufactures uniforms for construction workers. The financial year ended on 29 February 2024.

REQUIRED:
3.2 Calculate the correct factory overhead cost by taking into account the errors and omissions.
3.3 Complete the Production Cost Statement for the financial year.

INFORMATION:

A.   Factory overhead costs:

The bookkeeper calculated the factory overhead cost as R258 200.

The following errors and omissions were identified and must be taken into account:

(i) Water and electricity expense was omitted from the factory overhead cost. 75% of this expense must be allocated to the factory and the remaining 25% to administration. R9 600 was correctly allocated to administration.

(ii) The total rent expense, R142 800, was recorded in the Factory Overhead Cost Account. This should have been shared according to floor area as follows:

Factory        Sales Department        Administration
                           220 m²         120 m²                          80 m²

(iii) Insurance expense, R48 000, was allocated to factory overheads in error using the ratio 4 : 2 : 1. However, the correct ratio is 5 : 2 : 1.

B.   Raw material stock:

Stock of raw material (fabric) transferred to the factory is valued using the FIFO method. Stock records revealed the following:

Quantity (metres)          Cost per metre            Total cost

Stock on 1 March 2023          8 000 m        R10,50                      R84 000
Purchases of fabric           62 000 m        R11,80                    R739 600
June 2023                      24 000 m        R12,20                    R292 800
October 2023               22 000 m        R12,40                    R272 800
Total fabric available           70 000 m                                      R823 600
Issued to factory                59 500 m                  ?

C.    Work-in-progress stock:

Balance                                     29 Feb. 2024               ?
Balance                                     28 Feb. 2023             R30 700

D.   Production:

20 200 uniforms were produced during the financial year at a cost of R79.00 per uniform.

This question is continued on the next page.

HIKING BAGS

3.4 Comment on the control over direct material cost of hiking bags. Quote figures.
Give TWO reasons that may have contributed to the change in the unit cost.
3.5 Explain whether the decision to increase the selling and distribution cost of hiking bags was beneficial to the business or not. Quote figures.
3.6 Kyla plans to increase the production of hiking bags by an additional 2 500 units over the next financial year. Assuming no change to the current cost structure, calculate the additional net profit that she could expect to earn in 2025.

HIKING JACKETS

3.7 Comment on the fixed cost per unit of hiking jackets and explain the major cause for the change in this unit cost.
3.8 Identify the production cost of hiking jackets that should be of serious concern to Kyla. Provide TWO valid solutions to this problem.

3.1 Choose a cost category from COLUMN B that matches the example in COLUMN A - NSC Accounting - Question 3 - 2024 - Paper 2

Worked Solution & Example Answer:3.1 Choose a cost category from COLUMN B that matches the example in COLUMN A - NSC Accounting - Question 3 - 2024 - Paper 2

3.2 Calculate the correct factory overhead cost by taking into account the errors and omissions.

3.3 Complete the Production Cost Statement for the financial year.

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