Question 1:
(a) Prepare the Actual Statement of Comprehensive Income for the year
ended 31 December 2024 using direct costing principles.
Calculate Direct Costs:
Raw Material Cost per Wardrobe:
Melamine Board: 5*R750 = R3,750
Nails and Handles: R200
Varnish Paint: R350
Total Raw Material Cost per Wardrobe: R3,750 + R200 + R350 = R4,300
Calculate Labour Costs:
Normal Labour Cost:
Employees: 4 * 40 * 49 * R16 = R125,440
Supervisor: 40 * 49 * R21 = R41,160
Overtime Labour Cost:
Employees: 4 * 10 * 2 * R16 = R1,280
Supervisor: 10 * 2 * R21 = R420
Total Labour Cost: R125,440 + R41,160 + R1,280 + R420 = R168,300
Calculate Variable Manufacturing Overheads:
Electricity Cost per Wardrobe: R200
Total Variable Manufacturing Overheads: 195 * R200 = R39,000
Calculate Fixed Manufacturing Overheads:
Depreciation: R5,000 * 12 = R60,000
Calculate Administrative and Advertising Expenses:
Administrative Expenses: R3,000 * 12 = R36,000
Advertising Expenses: R1,000 * 12 = R12,000
Calculate Total Costs:
, Total Direct Costs: 195 * R4,300 = R838,500
Total Manufacturing Overheads: R39,000 + R60,000 = R99,000
Total Administrative and Advertising Expenses: R36,000 + R12,000 = R48,000
Calculate Revenue:
Total Revenue: 200 * R8,500 = R1,700,000
Prepare the Statement of Comprehensive Income:
Revenue: R1,700,000
Less: Direct Costs: R838,500
Less: Manufacturing Overheads: R99,000
Less: Administrative and Advertising Expenses: R48,000
Net Income: R1,700,000 - R838,500 - R99,000 - R48,000 = R714,500
(b) Calculate the over/under recovered fixed manufacturing overheads
for the 2024 financial year.
Step-by-Step Calculation:
Applied Fixed Manufacturing Overheads: R100,000
Actual Fixed Manufacturing Overheads: R60,000
Over/Under Recovery: R100,000 - R60,000 = R40,000 (Over-recovered)
(c) Prepare a journal entry for the over/under recovered fixed manufacturing
overheads.
Journal Entry:
Debit: Fixed Manufacturing Overheads R40,000
Credit: Cost of Goods Sold R40,000
(d) Differentiate between direct costing system and absorption costing
system.
Direct Costing System:
Only variable costs are included in product costs.
Fixed manufacturing overheads are treated as period costs.
Absorption Costing System:
(a) Prepare the Actual Statement of Comprehensive Income for the year
ended 31 December 2024 using direct costing principles.
Calculate Direct Costs:
Raw Material Cost per Wardrobe:
Melamine Board: 5*R750 = R3,750
Nails and Handles: R200
Varnish Paint: R350
Total Raw Material Cost per Wardrobe: R3,750 + R200 + R350 = R4,300
Calculate Labour Costs:
Normal Labour Cost:
Employees: 4 * 40 * 49 * R16 = R125,440
Supervisor: 40 * 49 * R21 = R41,160
Overtime Labour Cost:
Employees: 4 * 10 * 2 * R16 = R1,280
Supervisor: 10 * 2 * R21 = R420
Total Labour Cost: R125,440 + R41,160 + R1,280 + R420 = R168,300
Calculate Variable Manufacturing Overheads:
Electricity Cost per Wardrobe: R200
Total Variable Manufacturing Overheads: 195 * R200 = R39,000
Calculate Fixed Manufacturing Overheads:
Depreciation: R5,000 * 12 = R60,000
Calculate Administrative and Advertising Expenses:
Administrative Expenses: R3,000 * 12 = R36,000
Advertising Expenses: R1,000 * 12 = R12,000
Calculate Total Costs:
, Total Direct Costs: 195 * R4,300 = R838,500
Total Manufacturing Overheads: R39,000 + R60,000 = R99,000
Total Administrative and Advertising Expenses: R36,000 + R12,000 = R48,000
Calculate Revenue:
Total Revenue: 200 * R8,500 = R1,700,000
Prepare the Statement of Comprehensive Income:
Revenue: R1,700,000
Less: Direct Costs: R838,500
Less: Manufacturing Overheads: R99,000
Less: Administrative and Advertising Expenses: R48,000
Net Income: R1,700,000 - R838,500 - R99,000 - R48,000 = R714,500
(b) Calculate the over/under recovered fixed manufacturing overheads
for the 2024 financial year.
Step-by-Step Calculation:
Applied Fixed Manufacturing Overheads: R100,000
Actual Fixed Manufacturing Overheads: R60,000
Over/Under Recovery: R100,000 - R60,000 = R40,000 (Over-recovered)
(c) Prepare a journal entry for the over/under recovered fixed manufacturing
overheads.
Journal Entry:
Debit: Fixed Manufacturing Overheads R40,000
Credit: Cost of Goods Sold R40,000
(d) Differentiate between direct costing system and absorption costing
system.
Direct Costing System:
Only variable costs are included in product costs.
Fixed manufacturing overheads are treated as period costs.
Absorption Costing System:
