QUESTION 1                                                                                                          (45 marks)

 Custom Couches (Pty) Ltd uses a job costing system to manufacture various types of couches for their customers. Manufacturing overheads are allocated to jobs on the basis of a predetermined rate i.e., it is based on direct labour hours. The budgeted manufacturing overheads for the period (November 2022) were R108 000 and the anticipated direct labour hours for the same period were estimated to be 160 hours. The organisation records under- or over-absorbed overheads in the cost of sales account.

On 1 November 2022, the general ledger of the company indicated the following:

The following occurred during the month of November 2022:

• Job Z was started during the month and is still in progress at the end of the
• Job Y was completed during the month (Job Y was still in progress at the beginning of the month).
• Job X was invoiced to a customer at a profit of 30% of the
• Raw material purchases amounted to R75 000 and were all purchased on
• Raw materials were issued as follows:
  • Job Y: R20 000
  • Job Z: R40 000
  • Indirect raw material was R7 000
• Labour costs were as follows:

• Direct labour on Job Y (36 hours): R3 600
• Direct labour on Job Z (120 hours): R11 400
• Indirect labour: R5 500

• Other costs incurred during the month:
  • Rent of the factory premises: R50 000
  • Depreciation of manufacturing machines: R44 000
  • Selling and administration costs: R13 000

REQUIRED: 

Prepare the following general ledger accounts:

• Raw material control (used for both direct and indirect materials) (8 marks)
• Work in progress (WIP) control (12.5 marks)
• Labour control (used for both direct and indirect labour) (4.5 marks)
• Finished goods control (5.5 marks)
• Manufacturing overhead control (10 marks)
• Cost of Sales (4.5 marks)

Properly balance the accounts. Dates can be ignored.

Competency Framework Reference: 

QUESTION 2                                                                                                          (18 marks) 

Jeenie Carpets (Pty) Ltd is a carpet manufacturer that specialises in making traditional hand-knotted carpets. Carpet weavers are the main wage earners at Jeenie Carpets (Pty) Ltd. Roger is a Carpet Weaver. Roger earns a basic wage rate of R80 per hour. He further gets an annual, guaranteed holiday bonus of R5 000.

Jeenie Carpets (Pty) Ltd makes the following contributions:

• 15% of the normal wage (including leave days) to the pension
• 10% of the normal wage (including leave days) to the medical
• An annual UIF contribution of R1 664 per Carpet Weaver.

Additional information:

• The company operates a 40-hour week (Monday to Friday) for 52 weeks a financial
• Employees work 5 days a week (Monday to Friday).
• Every employee receives 20 days of annual
• There are 19 public holidays per financial year.
• Idle time makes up 6% of available hours.

REQUIRED:

Calculate the following regarding Roger:

• Total annual productive hours (5 marks)
• Total annual labour cost (6.5 marks)
• The productive hours labour recovery rate (2.5 marks)
• Prepare the journal entry/entries to account for the employer contributions for the financial (4 marks)

Competency Framework Reference: 

QUESTION 3                                                                                                          (37 marks)

 Label (Pty) Ltd is a local clothing manufacturer that manufactures T-shirts according to the specific designs or prints required by their customers. In order to tailor-make the T-shirts, Label (Pty) Ltd’s designers spend a lot of time on the phone discussing the details with their customers. During the six months ended 31 December 2022, the following information was obtained:

Additional information:

It is estimated that in January 2023, the total number of units (tailor-made T-shirts) manufactured will be 115.

REQUIRED:

Calculate the total budgeted semi-variable telephone costs if 115 T-shirts are manufactured in January 2023 using the following methods:

• The high-low method. Use the high output level to calculate the fixed cost (11 marks)

• The least squares method (regression analysis). Use the following formulae when using this method:

∑xy = a∑x + b∑x2        (1)

∑y = na + b∑x               (2)

Where:

y = the dependent variable (cost)

a = the intercept on the y-axis i.e. the fixed cost

b = the variable cost per unit and the slope of the line x = the independent variable (activity level)

n = the number of observations

Round to two decimal places. Show all workings.                                  (24 marks)

• Describe the difference between product cost and period (2 marks)

Competency Framework Reference: 

Get answers on Principles of Management Accounting Questions

Answer 1: The general ledger account in relation to raw material control, work in progress, labour control, finished goods control, manufacturing overhead control and cost of sales is performed as follows:

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