MANUFACTURING
QUESTIONS
ACCOUNTING GRADE 12
ENGLISH
1
ACTIVITY 1
NSC NOV 2019 , QUESTION 1
MANUFACTURING
Sihle Sangweni owns two separate factories that manufacture products according to orders
received. There is no work-in-progress stock. The year-end is 28 February.
1.1
1.2
Indicate whether the following statements are TRUE or FALSE. Write only 'true'
or 'false' next to the question numbers (1.1.1 to 1.1.3) in the ANSWER BOOK.
1.1.1
Wages of factory cleaners is a direct labour cost.
1.1.2
Delivery costs of finished goods to retailers are a selling and distribution
cost.
1.1.3
Depreciation on office equipment is an administration cost.
(3 x 1)
(3)
DESKS FACTORY
REQUIRED:
1.2.1
Complete the Factory Overhead Cost Note.
(8)
1.2.2
Calculate the total cost of production of finished goods.
(5)
1.2.3
Sihle wants to produce an additional 1 500 desks, while maintaining the
selling price and costs.
Calculate the additional profit he can expect.
1.3
(4)
CHAIRS FACTORY
REQUIRED:
1.3.1
Provide a calculation to confirm the break-even point for 2019.
(4)
1.3.2
Comment on the break-even point and the production level achieved.
Quote figures.
(4)
1.3.3
Raw material consists of wood only. In 2019 the cost is R120 per square
metre (m2) and 1,2 m2 of wood is needed to make one chair.
During the year, 22 000 m2 wood was dispatched to the factory. Sihle feels
that the wood raw material was not well controlled.


1.3.4
Provide a calculation to support his opinion.
Identify TWO possible causes of this problem. Provide a solution for
EACH.
Give TWO reasons for the increase in direct labour cost. Provide a
solution for EACH. Note that wages and salaries increased by 5% in the
current financial year.
Manufacturing –Questions
(4)
(4)
(4)
2
INFORMATION:
A.
DESKS FACTORY
Extract of pre-adjustment amounts on 28 February 2019
R
296 500
166 000
24 500
248 000
345 600
12 600
107 700
Indirect labour
Depreciation of factory plant
Advertising
Water and electricity
Rent expense
Insurance allocated to sales department
Factory sundry expenses
Adjustments to factory overheads for desks:
B.

Water and electricity for February 2019, R18 000, must be taken into
account. 80% is allocated to the factory. The balance is an administration
cost.

Rent must be allocated according to floor area:
Factory: 810 m2
Office: 180 m2
Sales department: 90 m2

75% of insurance must be allocated to the factory. The balance applies
to the sales department.
INFORMATION FOR BOTH FACTORIES
COSTS
Variable
Fixed
Direct material
Direct labour
Selling and distribution
Total variable costs
Factory overheads
Administration
Per unit
DESKS
2019
Amount
Per unit
R3 060 000
R340
?
R160
R720 000
R80
R580
R360 000
SELLING PRICES
R750
R40
CHAIRS
(Unit costs)
2019
2018
R165
R124
R90
R70
R50
R60
R305
R250
R76
R75
R20
R18
R390
R370
UNITS
Produced and sold
Break-even point
9 000
8 471
16 000
18 071
15 000
12 400
40
Manufacturing –Questions
3
ACTIVITY 2
NSC NOV 2018 , QUESTION 1
MANUFACTURING
1.1
1.2
(40 marks)
Indicate whether the following statements are TRUE or FALSE. Write only 'true'
or 'false' next to the question numbers (1.1.1 to 1.1.3) in the ANSWER BOOK.
1.1.1
Bad debts are an administration cost.
1.1.2
Indirect labour is a factory overhead cost.
1.1.3
Rent expense is a fixed cost.
(3)
KRIGE SHIRTS
The business manufactures shirts. The financial year-end is 31 July 2018.
REQUIRED:
1.2.1
1.2.2
Refer to Information C.
Calculate direct labour cost.
(9)
Production Cost Statement for the year ended 31 July 2018
(12)
INFORMATION:
A.
Work-in-progress stock balance
31 JULY 2018
?
B.
Raw materials issued to factory: R528 300
C.
Direct labour:
1 AUGUST 2017
R35 570
Number of factory workers
4
Normal time expected per worker per year
1 960 hours
Normal time rate
R90 per hour
Bonuses to workers: 12% of normal wages
NOTE: One worker worked only 1 680 hours and received a reduced
bonus of R12 146.
D.
Factory overheads were calculated at R360 880 for the year. However,
this excludes insurance of R48 750 paid for the period 1 August 2017 to
31 August 2018. Insurance must be allocated to the factory,
administration and sales in the ratio 4: 3: 2.
E.
Production for the year: 17 500 shirts at a cost of R95 per shirt
Manufacturing –Questions
4
1.3
GEMMA'S MANUFACTURERS
This business manufactures security gates. The financial year-end is 31 August
2018.
REQUIRED:
1.3.1
1.3.2
1.3.3
Calculate the break-even point for the year ended
August 2018.
31
(5)
Compare and comment on the break-even point and the production
level achieved over the last two years. Quote figures.
(6)
Give TWO reasons for the increase in direct material cost. Suggest
ONE way to control this cost.
(5)
INFORMATION FOR YEAR ENDED 31 AUGUST:
A.
COSTS
Direct materials
Direct labour
Selling and distribution
TOTAL VARIABLE COST
Factory overheads
Administration
B.
Variable
Fixed
2018
UNIT
TOTAL
COST
AMOUNT
75 600
R180
105 840
R252
60 900
R145
242 340
R577
67 200
51 660
R160
R123
2017
UNIT
COST
R148
R244
R136
R156
R127
Additional information:
Total sales
Selling price per unit
Units produced and sold
Break-even point
2018
R382 200
R910
420 units
?
2017
R475 200
R880
540 units
435 units
40
Manufacturing –Questions
5
ACTIVITY 3
NSC NOV 2017 , QUESTION 2
MANUFACTURING
2.1
(55 marks)
GEVEN MANUFACTURERS
The business produces wooden tables.
REQUIRED:
Prepare the following for the year ended 28 February 2017:
2.1.1
Production Cost Statement
(14)
2.1.2
Abridged Income Statement
(14)
INFORMATION:
A.
Stock on hand:
Work-in-process
Finished goods
28 FEBRUARY 2017
?
400 tables,
valued using
FIFO method
1 MARCH 2016
R160 000
1 200 tables at R280
= R336 000
B.
Production and sales for the year:
 7 200 tables were produced at a unit cost of R330 each.
 8 000 tables were sold for R4 080 000.
C.
Costs (before adjustments):
Administration
Factory overheads
Direct materials
Direct labour
Selling and distribution
R148 400
R487 200
R1 050 000
?
R422 000
Adjustments:
 Payment to EZ Transport, R102 000, was incorrectly allocated to Selling and
Distribution. This was actually meant for delivering wood to the factory.
 The cleaning contract for the year, R126 000, was shared between Factory
and Administration in the ratio 2: 1. However, 80% should have been allocated
to Factory.
D.
Prime cost: R1 800 000 (after adjustments)
Manufacturing –Questions
6
2.2
GYMWEAR MANUFACTURERS
Gymwear Manufacturers is owned by Jan Fiks. They produce shoes and shirts for gym
training. Jan requires assistance in interpreting his 2017 results. Note that one pair of
shoes comprises one unit.
REQUIRED:
2.2.1
Shirts:
 Calculate the break-even point for shirts.

Jan is not satisfied with the variable costs per unit, even though the
total variable costs per unit decreased by R6.
-
Identify ONE variable cost (with figures) that has not been well
controlled. Give TWO possible reasons for this problem.
(4)
Explain why Jan might be concerned about the large decreases
in the other TWO variable costs.
(4)
Jan does not understand why the unit cost of production has
increased when neither his fixed costs nor the variable costs have
increased. Explain why this is so. State ONE point (with figures).
(4)

2.2.2
(4)
Shoes:

Calculate the % increase in the selling price of shoes.
(3)

Jan decided to improve the quality of the shoes and to export them.
Explain how the direct material costs and the selling and distribution
costs were affected by this decision. Provide figures.
(4)
Jan was concerned that the increase in price would have a negative
impact on the business. Explain whether his concern was justified.
State TWO points.
(4)

Manufacturing –Questions
7
INFORMATION:
SHIRTS
2016
?
11 522
16 100
25 000
R500 400
R620 000
R302
R290
R310
R290
SHOES
2017
2016
3 842
4 317
7 750
6 500
R2 379 750 R1 183 000
R1 640
R1 260
R1 100
R1 250
R530 000
R530 000
R2 340 000
R2 340 000
?
R238
?
R244
R302
R1 031
R360
R718
R92
R116
R456
R330
R131
R100
R381
R360
R15
R28
R194
R28
R242
R228
R1 100
R1 004
2017
Break-even point
Units produced and sold
Net profit
Selling price per unit
Selling price of competitors
Total fixed costs (factory
overhead and administration)
Total fixed cost per unit
Total variable costs per unit
Direct material costs per
unit
Direct labour costs per unit
Selling and distribution
costs per unit
Unit cost of production
55
Manufacturing –Questions
8
ACTIVITY 4
NSC FEB 2018, QUESTION 3
QUESTION 3: MANUFACTURING
3.1
(45 marks; 25 minutes)
GLAMOUR DRESS CREATIONS
Glamour Dress Creations manufactures one type of ladies' dress. The financial
year ended on 28 February 2017.
REQUIRED:
3.1.1
3.1.2
Prepare the Production Cost Statement for the year ended
28 February 2017.
(21)
Calculate the net profit for the year ended 28 February 2017.
(7)
INFORMATION:
A.
Stock balances, among others, were taken from the General Ledger:
Work-in-process stock
Finished goods stock
B.
Information
extracted
28 February 2017:
28 FEBRUARY 2017
?
R190 000
from
the
financial
1 MARCH 2016
R76 000
R110 000
records
Administration cost
Raw/Direct material cost
Factory overhead cost
Selling and distribution cost
Net wages paid to factory workers (direct labour)
SARS: PAYE
UIF deductions
Sales
Cost of sales
C.
R259 010
918 550
227 240
410 000
753 300
48 600
1%
?
1 860 000
The following information has not been taken into account:



D.
on
A problem was identified regarding the valuation of the closing stock
of raw materials: 5 000 metres of material on hand, with a unit cost of
R2,75 per metre, were erroneously recorded as R3,80 per metre. This
must be corrected.
Rent expense was omitted from the figures above. Total rent paid for
the financial year amounted to R87 100. The rent for March 2017 has
been paid in advance. The rent was increased by R650 on
1 December 2016. 80% of this expense must be allocated to the
factory and the balance must be regarded as an office expense.
The employer contributes 1% to UIF on behalf of the employees.
The business uses a mark-up percentage of 75% on cost. During the
financial year special discounts of R85 000 were offered to cash
customers who bought in bulk.
Manufacturing –Questions
9
Manufacturing –Questions
10
3.2
LIGHTING SOLUTIONS
George Mkize is the owner of Lighting Solutions, a manufacturing business that
produces one type of energy-saving light bulb. The financial year ended on
31 December 2017.
NOTE:


Production is based on orders received; therefore there are no balances for workin-process.
The current inflation rate is 8%.
REQUIRED:
3.2.1
3.2.2
3.2.3
3.2.4
Calculate the factory overhead cost per unit for the year ended 31 December
2017.
(2)
Explain why George would not be concerned about the 28,1% increase in
total variable cost from R936 000 to R1 200 000.
(3)
Give TWO reasons for the increase in the selling and distribution cost per
unit.
(2)
George wants to know if the production level for this financial year is
satisfactory.


3.2.5
Calculate the break-even point for the year ended 31 December 2017.
Comment on the production level for 2017. State TWO points. Quote
figures.
Lighting Solutions are considering importing raw materials because it is
cheaper and of a higher quality. Name TWO aspects that they must consider
before finalising their decision.
(4)
(4)
(2)
INFORMATION:
Information from the records of Lighting Solutions on 31 December:
2017
TOTAL
(R)
Fixed costs:
Factory overhead cost
Administration cost
Variable costs:
Direct material cost
Direct labour cost
Selling and distribution cost
Selling price per unit
Number of units produced and sold
Break-even point (units)
575 000
395 000
180 000
1 200 000
435 000
560 000
205 000
R45,00
50 000
?
2016
UNIT
COST
(R)
11,50
(3.2.1)
24,00
8,70
11,20
4,10
TOTAL
(R)
UNIT COST
(R)
428 400
310 800
117 600
936 600
344 400
441 000
151 200
10,20
7,40
2,80
22,30
8,20
10,50
3,60
R41,50
42 000
22 313
45
Manufacturing –Questions
11
Manufacturing –Questions