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Electrix Limited, a South African based manufacturer, manufactures a single product that is used in a
variety of electrical products, in one process. The following information is available for September 2013:
Work-in-process - 1 September 2013 ......................................24 000 units
Material - 100% complete ...............................................R200 000
Conversion costs - 95% complete ...............................................R607 200
Material issued for 44 000 units.................................................................................R888 560
Conversion costs....................................................................................................R2 033 096
Units completed.....................................................................................................50 000 units
Work-in-process - 30 September 2013 ...................................10 000 units
Material - 100% complete.............................................
Conversion costs - 75% complete.............................................
Additional information:
1. Material is added at the beginning of the process. Conversion costs are incurred evenly throughout
the process.
2. Normal spoilage is estimated at 10% of input that reaches the point of spoilage.
3. Losses occur at the end of the process.
4. Stock is valued according to the first-in first-out method.
REQUIRED:
(a) Prepare the following statements for September 2013:
(i) Quantity statement (6)
(ii) Production cost statement (3)
(iii) Cost allocation statement (6)
(b) Prepare the quantity statement if normal spoilage occurs when the process is 80% complete. (5)
,QUESTION 2
STG Limited uses a standard costing system and manufactures a single product, Caniv. The
management of STG Limited has compiled the following Standard Costs Information Sheet:
Caniv
Product Standard Costs for the month ended 31 October 2013:
Material code Quantity (kg) Standard price Total
per kg
Direct material AV-736 5 R10 R50
Total material costs R50
Job number Standard hours Standard rate
per hour
Direct labour 1 3 R15 R45
Total labour costs R45
Standard variable manufacturing overhead rate
Manufacturing
(per unit of production)
overheads
? ?
(variable with
Total manufacturing overheads ?
production)
TOTAL STANDARD COSTS ?
Additional information:
1. No fixed manufacturing overheads were incurred by STG Limited.
2. The following information is available regarding the variable manufacturing overheads of product
Craze-E:
Budget:
Variable manufacturing overheads
(vary with production) R54 000
Normal capacity 12 000 units
Actual results:
Variable manufacturing overheads
(vary with production) R58 000
Production 11 500 units
3. Actual material and labour costs for the month ended 31 October 2013 were as follows:
Direct material R632 500
Direct labour (35 640 labour hours) R516 925
REQUIRED:
Calculate the following for October 2013 (round off amounts to two decimal places):
(a) The standard variable manufacturing overhead rate (1½)
(b) The variable manufacturing overheads rate variance
(in respect of overheads that vary with production) (2½)
,(c) The variable manufacturing overheads efficiency variance
(in respect of overheads that vary with production) (1)
(d) The total variable manufacturing overheads variance
(in respect of overheads that vary with production) (1)
(e) The total material variance (2½)
(f) The labour efficiency variance (3)
(g) The labour rate variance (3)
(h) The total labour variance (1)
(i) The standard selling price if 11 500 units were actually sold at R132 per unit,
with a selling price variance of R51 000 (unfavourable) (2½)
(j) The amount of direct labour costs to be recorded in the Production Account of
the general ledger and whether the account has to be debited or credited with
this amount (2)
, QUESTION 3
The following information was extracted from the accounting records of Pinky Ltd for the year ended
31 August 2013 and their 2014 budget:
2013 2014
Actual Budget
Total manufacturing cost per unit R15,15 ???
Completed units beginning of the year 4 000 8 000
Manufactured for the year 35 000 ???
Sales for the year ??? 42 000
Fixed costs
Production ??? R325 000
Selling and administrative ??? R158 000
Variable cost per unit
Production R10,20 R11,00
Selling and administrative R 1,25 R 1,40
Stock valuation method FIFO FIFO
Pinky Ltd
Budgeted Income statement for the year ended 31 August 2014
R
Sales 1 050 000
Less: Cost of sales 803 918
Opening stock 121 200
Production costs 721 000
Less: Closing stock (38 282)
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