Grade 12 · CAPS

Grade 12 Cost Accounting

Accounting practice questions and a worked example

Grade 12 cost accounting covers the costs of a manufacturing business. The questions here ask you to calculate direct material cost and direct labour cost, correct the Factory Overhead Cost Note, work out the cost of production of finished goods and the break-even point, and comment on unit costs and the level of production with figures. They come from the NSC Paper 2 for November 2023, 2024 and 2025, each with the answer from the marking guideline.

Worked example

2.1 T2FIT MANUFACTURERS The business, owned by Mark Fit, manufactures T-shirts. The financial year ended on 28 February 2023. 2.1.5 Mark is concerned about the increase in the cost of raw materials over the financial year. Provide TWO strategies that Mark can use to address the problem of wastage.

Answer & explanation

• Improve the training of factory workers. • Use cutting patterns / cutting technology / cutting machines / order pre-cut fabric. • Use material of a better quality / cheaper supplier / change suppliers. • Regular servicing/maintaining of machines. • Use offcuts effectively for related products, e.g. caps, hoodies. • Pay incentives/bonuses for minimising wastage; encourage efficiency. • Increase supervision / monitor production to ensure workers are not careless.
To address the problem of wastage in raw materials, Mark can implement several strategies. First, improving the training of factory workers can ensure that they handle materials more efficiently and reduce errors that lead to wastage. Second, using cutting patterns or cutting technology can optimize the use of fabric, ensuring minimal waste. This involves using precise cutting machines or ordering pre-cut fabric to reduce offcuts. Both strategies focus on enhancing efficiency and minimizing unnecessary loss of materials.

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Cost Accounting

Question 1 of 3

2.1 T2FIT MANUFACTURERS The business, owned by Mark Fit, manufactures T-shirts. The financial year ended on 28 February 2023. 2.1.1 Refer to Information A. Calculate the direct material cost.

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More practice questions

Explore additional Grade 12 Cost Accounting questions.

  • 2
    2.1 T2FIT MANUFACTURERS The business, owned by Mark Fit, manufactures T-shirts. The financial year ended on 28 February 2023. 2.1.4 Calculate the cost of the wastage of raw materials.
  • 3
    2.2 LIGHTING KINGS (PTY) LTD The business manufactures light bulbs. Richard Smith, the CEO (chief executive officer), intended to reduce the production cost of Orion bulbs due to technological changes and to introduce the new Starlet bulbs by setting up a new factory.
    2.2.1 Do a calculation to confirm that the 2023 break-even point of 149 145 units for Orion bulbs is correct.
  • 4
    2.2 LIGHTING KINGS (PTY) LTD The business manufactures light bulbs. Richard Smith, the CEO (chief executive officer), intended to reduce the production cost of Orion bulbs due to technological changes and to introduce the new Starlet bulbs by setting up a new factory.
    2.2.2 Identify and explain TWO cost items (with figures) that may have contributed to the increase in the cost of production per unit. Provide a reason in each case. Note that the current inflation rate is 7%.
  • 5
    2.2 LIGHTING KINGS (PTY) LTD The business manufactures light bulbs. Richard Smith, the CEO (chief executive officer), intended to reduce the production cost of Orion bulbs due to technological changes and to introduce the new Starlet bulbs by setting up a new factory.
    2.2.3 Explain whether the new Starlet bulbs were a good idea or not. Provide TWO points. Quote figures.

Common mistakes

  • Using total costs in the break-even formula. Break-even point = total fixed costs ÷ (selling price per unit – variable cost per unit).
  • Charging a shared cost to one department. Rent, insurance and water and electricity are split between the factory, the office and the sales department in the ratio or floor area given.
  • Commenting on a unit cost for one year only. Quote the cost per unit for both years and say whether it increased or decreased.

More Grade 12 Accounting topics

Cost Accounting in other grades

Aligned to CAPS Grade 12 Accounting — Cost Accounting. Curriculum source: CAPS for the FET Phase, Department of Basic Education.

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