GEVEN MANUFACTURERS The business produces wooden tables - NSC Accounting - Question 2 - 2017 - Paper 1

To prepare the Production Cost Statement, we start by calculating the direct costs involved.

Direct Material Cost

The Direct Material Cost consists of:

• Direct materials: R1,050,000
• Transportation charges previously misallocated: R102,000

Therefore, the adjusted Direct Material Cost is: $DMC = 1,050,000 + 102,000 = R1,152,000$

Direct Labour Cost

From the information provided, Direct Labour is $R422,000$.

Total Prime Cost

The Prime Cost is defined as the sum of direct material, direct labour, and direct materials: $ext{Prime Cost} = DMC + ext{Direct Labour} = 1,152,000 + 422,000 = R1,574,000$

Factory Overhead

The factory overheads are R487,200. After adjustments, the cleaning contract of R126,000, 80% of which should be allocated to Factory, is: $ext{Factory Overhead after adjustment} = 487,200 + (R126,000 imes 0.8) = 487,200 + 100,800 = R588,000$

Work-in-process

At the start of the year, we have:

• Work-in-process on hand at the beginning: R160,000
• Work-in-process at the end is unknown, we denote it as WIP.

Total Production Cost

The Total Production Cost can now be calculated: $ext{Total Production Cost} = ext{Prime Cost} + ext{Factory Overheads} + WIP - ext{Ending WIP}$

Final Calculation

Putting everything together we can summarize the Production Cost Statement.