Unit 5 practice questions

Question 1
Osama Pty (Ltd) is a small clothing manufacturer owned by Zakhele Banting. It produces various
clothing items from demin, dresses to leather jackets. Osama employs 7 workers who are directly
involved in the manufacturing process. Each worker is paid a salary of R 3 500 per month. During
the year, Osama acquired R 75 000 work of Demin material, R25 000 printed material and
R22 000 worth of leather. All these materials will be used to make the final products. Of these
materials, R22 000 worth of stock was on hand at the end of the period.
In addition, Osama incurred the following expenses:
 Rent expense of R15 000 per month
 Quality assurance manager salary of R 10 000 per month for 6 months)
 Electricity expense of R20 500
 Indirect material costs amounted to R12 750
 Administration fee of R16 000
At the beginning of the year Osama had R 350 000 worth of product in the manufacturing process.
Of these, only R 27 600 was in the manufacturing process at the end of the year
Assume that the year end is 31 October 2022.
Required
1.1 Calculate the direct material used in the production process (this is the direct material cost that
will appear in the manufacturing cost statement)
1.2 Calculate the direct labour cost for the year.
1.3 Calculate the total manufacturing overhead costs for the year.
1.4 Using your previous answers, calculate the total manufacturing costs
1.5 Prepare a manufacturing cost statement

Question 2
Netfly is an airplane manufacture. It manufactures airplanes and helicopters for Airmite airline.
The manufacturing department consists of 35 employees who are directly involved in the
manufacturing of the aircrafts. Each employee manufactures 16 aircrafts per year. The employees
are paid a wage of R 2 500 per aircraft manufactured.
Netfly purchased a total of R2 000 000 worth of materials to be used in the manufacturing process.
They had an opening balance of R50 000 and a closing balance of R 300 000.

Required
Calculate the prime costs for the year.
Question 1
1.1 Direct materials used in the production process:
Opening balance = 0
Purchases = 122 000½ 75 000½+ 25 000½+ 22 000½
Closing balance= (22 000) ①
100 000 ①

1.2 Direct labour= 7 employees①* R 3500①* 12 months ①

= R294 000 ①

1.3 Manufacturing overheads

Rent expense= 180 000① 15 000*12 months
Quality assurance manager salary= 60 000① 10 000* 6 months
Electricity expense= 246 000① 20 500* 12 months
Indirect material=153 000① 12 750* 12 months
639 000 ①
Admin costs are not included because they are non-manufacturing costs. Non-manufacturing
costs are expenses in the income statement as and when they are incurred.

1.4
Direct material 100 0001p
Direct labour 294 0001p
Prime costs 394 000
Manufacturing overheads 639 000 1p
Total manufacturing costs 1 033 000 1p

1.5 Manufacturing cost statement for the period ended 31 October 2020
Direct material 100 0001p
Direct labour 294 0001p
Prime costs 394 000
Manufacturing overheads 699 000 1p
Total manufacturing costs 1 033 000
Work-in-progress at beginning of year 350 000①
1 383 000
Work-in-progress at end of year (27 600) ①
Cost of manufacture of finished goods 1 355 400①

Question 2
Direct material:
Opening balance = 50 000½
Purchases = 2 000 000½
Closing balance= (300 000) ½
1 750 000 ½
Direct labour= 16①* 2 500①*35 employees ①
= 1 400 000①
Prime cost= 1 750 0001p+ 1 400 0001p
= 3 150 000 1p

Notes*
Please take note of the manner in which answers are presented when calculation the prime cost,
total manufacturing costs as well as the cost of finished good. You should present your answers in
the manner above in order to maximize marks