NSC Accounting Production Cost Statement: 2.2 TIGHT-FIT MANUFACTURERS The

2.2 TIGHT-FIT MANUFACTURERS The information relates to Tight-Fit Manufacturers, a business that manufactures denim jeans, for the financial year ended 31 March 2018 - NSC Accounting - Question 2 - 2018 - Paper 1

Question 2

2.2 TIGHT-FIT MANUFACTURERS The information relates to Tight-Fit Manufacturers, a business that manufactures denim jeans, for the financial year ended 31 March 2018... show full transcript

Worked Solution & Example Answer:2.2 TIGHT-FIT MANUFACTURERS The information relates to Tight-Fit Manufacturers, a business that manufactures denim jeans, for the financial year ended 31 March 2018 - NSC Accounting - Question 2 - 2018 - Paper 1

Step 1

2.2.1 Calculate: The value of the closing stock of raw materials of fabric using the weighted-average method.

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Answer

To calculate the closing stock of raw materials using the weighted-average method, we determine the average cost per unit.

Calculate the total cost of raw materials:
- Total units available for sale = Beginning Balance + Purchased = 2,607,000 + 23,700 units
- Total cost = 2,607,000 + (23,700 × 3,900) = 2,607,000 + 92,610 = 2,699,610
Average cost per unit:
- Average cost per unit = Total costs / Total units = 2,699,610 / (2,607,000 + 23,700)
Closing stock calculation:
- Closing stock = Average cost × Closing units = Average cost × 110,000
- Final value = $429,000

Step 2

2.2.1 Calculate: The value of direct/raw materials issued for production.

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Answer

To find the value of direct/raw materials issued for production:

Use the formula:

Direct Materials Issued = Total Raw Materials - Closing Stock

Thus, it becomes:

Direct Materials Issued = 2,607,000 - 429,000 = 2,178,000

Step 3

2.2.1 Calculate: The correct factory overhead costs.

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Answer

For the factory overhead costs calculation:

Total factory overhead is calculated by summing the identified cost elements and any adjustments made during the period.

Assume: Factory overhead = Total cost identified = 862,500.

Step 4

2.2.2 Complete the Production Cost Statement on 31 March 2018.

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Answer

The Production Cost Statement should include:

Direct Materials Cost: $2,178,000
Direct Labour Cost: (provided data)
Factory Overhead Cost: $862,500

Thus the Prime Cost = Direct Materials Cost + Direct Labour Cost + Factory Overhead Cost.

Total Manufacturing Costs = Prime Cost + Work in Progress adjustment.

Step 5

2.2.3 Give TWO reasons why the business should support local suppliers.

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Answer

Reducing import charges – local sourcing minimizes additional costs related to import tariffs.
Supporting the local economy – helps boost local businesses and can improve community goodwill.

2.2 TIGHT-FIT MANUFACTURERS The information relates to Tight-Fit Manufacturers, a business that manufactures denim jeans, for the financial year ended 31 March 2018 - NSC Accounting - Question 2 - 2018 - Paper 1

Worked Solution & Example Answer:2.2 TIGHT-FIT MANUFACTURERS The information relates to Tight-Fit Manufacturers, a business that manufactures denim jeans, for the financial year ended 31 March 2018 - NSC Accounting - Question 2 - 2018 - Paper 1

2.2.1 Calculate: The value of the closing stock of raw materials of fabric using the weighted-average method.

2.2.1 Calculate: The value of direct/raw materials issued for production.

2.2.1 Calculate: The correct factory overhead costs.

2.2.2 Complete the Production Cost Statement on 31 March 2018.

2.2.3 Give TWO reasons why the business should support local suppliers.

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