Gr 10 Manufacturing concepts and calculations
All cost items in a manufacturing business (factory) are divided into THREE TYPES of costs:
- Production costs (the 'Cost of Sales' in a factory)
- Administrative costs;
- Sales & Distribution costs
[We will only focus on Production costs in Gr 10]
TOTAL PRODUCTION COST (ALL units completed)...
- is the total of ALL production cost items for a factory
- equals Direct Cost + Indirect Cost
- Direct Cost = Prime Cost
= Direct Material Cost + Direct Labour Cost
- Indirect Cost = Factory Overheads
TOTAL PRODUCTION COST per unit (for one item produced)
= TOTAL production cost ÷ the number of finished items
e.g.: R1000 (total cost); 20 units completed
= R5 per item
Which of the following reflects only direct materials:
(a) Flour, milk, sugar, cleaning materials
(b) Flour, milk, sugar, eggs
(c) Baking tin, spoon, bowl, mixer
(d) Flour, baking tin ,electricity, eggs
1.2 Which of the following labour is regarded as direct labour:
(a) Supervisor
(b) Salesman
(c) Baker
(d) Cleaner
1.3 Which of the following examples are all factory overheads:
(a) Electricity, cleaning materials, rent, manager's salary
(b) Cleaning materials, depreciation, manager's salary, cooking oil
(c) Sundry expenses, supervisor salary, cleaning materials, bad debts
(d) Flour, milk, icing sugar, eggs
1.4 Which of the following is NOT an example of a variable cost
(a) Cooking oil
(b) Rent
(c) Icing sugar
(d) Eggs
1.5 The total cost of production is R80 per cake. The selling price of one cake will be:
(a) R130
(b) R140
(c) R48
(d) R128
1.1 (b)
1.2 (c)
1.3 (a)
1.4 (b)
1.5 (d)
Ensure that you can clearly identify the various cost accounting concepts. It will help you when doing the cost calculations.
