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STAR WHEELS MANUFACTURERS You are provided with information relating to Star Wheels Manufacturers for the year ended 31 December 2015 - NSC Accounting - Question 2 - 2016 - Paper 1
Question 2
STAR WHEELS MANUFACTURERS You are provided with information relating to Star Wheels Manufacturers for the year ended 31 December 2015. The business manufactures one... show full transcript
Worked Solution & Example Answer:STAR WHEELS MANUFACTURERS You are provided with information relating to Star Wheels Manufacturers for the year ended 31 December 2015 - NSC Accounting - Question 2 - 2016 - Paper 1
Step 1
Prepare the following notes to the Production Cost Statement: Direct labour cost
Answer
To prepare the Direct Labour Cost for Star Wheels Manufacturers, we need to sum the basic salary and overtime as follows:
-
Basic Salary:
- Number of employees = 14
- Monthly salary per employee = R7,000
- Annual salary = 14 employees x R7,000 x 12 months = R1,176,000
-
Overtime:
- Total overtime hours per employee = 144 hours
- Overtime rate per hour = R65
- Total overtime for all employees = 14 employees x 144 hours x R65 = R122,880
-
UIF Contributions:
- UIF contributions = 1% of the basic salary = R1,176,000 x 1% = R11,760
-
Total Direct Labour Cost:
- Total = Basic Salary + Overtime + UIF = R1,176,000 + R122,880 + R11,760 = R1,310,640
Step 2
Prepare the following notes to the Production Cost Statement: Factory overhead cost
Answer
To calculate the Factory Overhead Cost, we need to consider all associated expenses:
-
Indirect Materials:
- Indirect materials value = R15,100
-
Salaries for Foremen:
- Foreman salary = R156,000
-
Utilities (Electricity and Water):
- Total for the year = R404,000
-
Rent Expense:
- Rent = R115,200
-
Insurance:
- Insurance cost = R277,200
-
Depreciation:
- Equipment depreciation = R641,200
-
Total Factory Overhead Cost:
- Total = Indirect Materials + Salaries + Utilities + Rent + Insurance + Depreciation = R15,100 + R156,000 + R404,000 + R115,200 + R277,200 + R641,200 = R1,608,700
Step 3
Prepare the Production Cost Statement
Answer
The Production Cost Statement includes the costs of production:
- Direct Labour Cost: R1,310,640
- Factory Overhead Cost: R1,608,700
- Total Production Cost:
- Total = Direct Labour Cost + Factory Overhead Cost = R1,310,640 + R1,608,700 = R2,919,340
Therefore, the completed Production Cost Statement will reflect:
- Direct Labour Cost: R1,310,640
- Factory Overhead Cost: R1,608,700
- Total Production Cost: R2,919,340