Tutorial Question

UNIT 5: Cost Determination

Campbell Company is a metal and wood cutting manufacturer, selling products for the home
construction market and their financial year end is on 31 December 2022. Consider the
following data for the year 2022:

Sandpaper R2 000
Materials-handling costs R70 000
Lubricants and coolants R5 000
Miscellaneous indirect manufacturing labour R40 000
Normal salaries for the factory workers R250 000
Overtime paid to factory workers R50 000
Salaries for the factory cleaners R36 000
Direct materials (at the beginning) R40 000
Direct materials (at the end) R50 000
Finished goods (opening) R100 000
Finished goods (closing) R150 000
Work in process (at the beginning) R10 000
Work in process (at the end) R14 000
Plant-leasing costs R54 000
Depreciation – plant equipment R36 000
Electricity for the factory R75 000
Rent R340 000
Property taxes on plant equipment R4 000
Fire insurance on plant equipment R3 000
Direct materials purchased R460 000
Revenues R2 100 000
Marketing promotions R60 000
Marketing salaries R100 000
Distribution costs R70 000
Customer-service costs R100 000

Additional information:

1. Sandpaper is used in the wood manufacturing process for tasks like sanding and
finishing wood products. Since it's not a direct material cost specific to a single product
(i.e., it's not used up completely on one item), it is considered an indirect cost as it
cannot be directly traced to a specific product. The cost of sandpaper is spread across
all the wood products produced in the manufacturing process.
2. 25% of the rent belongs to marketing and distribution.
3. Materials-handling costs relates to forklift of operators moving materials within the
factory.
REQUIRED:

1) 1.1 Calculate the direct materials issued to production.

1.2 Calculate the direct labour for the period.

1.3 Calculate the total prime cost.

1.4 Calculate the manufacturing overheads cost.

1.5 Calculate the total cost of finished goods manufactured during the 2022 financial period.

2) 2.1 Calculate the cost of goods sold.

2.2 Calculate the period expenses incurred by Campbell Company.

2.3 Prepare an income statement for Campbell Company for the 2022 financial period.