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    Alpha LTD Question

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    2018314506

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    © All Rights Reserved
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    Alpha LTD Question

    Uploaded by

    2018314506
    9 views2 pages

    Original Title

    Alpha Ltd Question

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    9 views2 pages

    Alpha LTD Question

    Uploaded by

    2018314506

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    © All Rights Reserved
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    An extract of the Trial Balance of Alpha Ltd for the year ended 28 February 2017 is tabulated below:

    R’000
    Revenue 1 000 000
    SALARIES
    Factory (workers)1 58 000
    Factory (management)2 38 000
    Sales3 50 000
    Human resources and payroll4 9 000
    Accounting 11 000
    Internal audit5 4 000
    Security6 3 000
    Engineers7 2 500
    DEPRECIATION8
    Factory equipment 12 000
    Warehouse fixtures 5 000
    Office fixtures and fittings 2 500
    Forklifts 2 500
    Delivery vehicles 3 000
    Buildings 5 000
    PURCHASES FROM CREDITORS
    Raw Material 75 000
    Spare parts for factory equipment9 8 000
    Grease and lubricants for factory machinery9 5 500
    Stationery for administrative use 200
    WATER & ELECTRICITY10
    Factory 32 000
    Warehouse 3 500
    Office 4 500
    OTHER
    Royalty11 20 000
    Telephone (office) (fixed charges of R0.6m included) 3 400
    Cleaning (office) (‘flat rate’ as per contract) 1 700
    Entertainment (this amount is spent in every period) 400
    Speeding fines 190
    Repairs (delivery)12 250
    Repairs (factory equipment)12 380
    External audit fee (as agreed per contract) 2 000
    Advertising and marketing (this amount is spent in every period) 42 000
    Profit 595 480

    Notes

    1. Factory workers are paid on the basis of hours worked, in order to match labour hours to
    production requirements.
    2. Factory management are permanent employees who are paid fixed salaries regardless of hours
    worked.
    3. Sales staff remuneration includes commission of 5 per cent of revenue.
    4. 60% of human resources and payroll time is spent on factory staff salaries and labour issues.

    5. 30% of internal audit time is spent on factory controls and procedures.

    6. Security guards are on the premises 24 hours a day, 7 days a week. Part of their responsibilities
    include checking all goods that leave the premises are accompanied by an authorised despatch
    note.

    7. An engineering team is permanently employed to monitor the factory equipment and perform
    routine maintenance on a regular basis.

    8. All assets are depreciated on a straight-line basis over their useful lives expressed in years, except
    for delivery vehicles which are depreciated based on the number of kilometres travelled. The
    number of kilometres travelled is roughly proportional to production volumes. 3 buildings exist on
    the premises –the factory building (depreciation of R2 500), the warehouse, in which raw
    materials are stored (R1 250), and the administrative building (R1 250).

    9. The amount of part replacements and lubrication that machines require is directly proportional to
    number of operating hours. Operating hours are dependant on production volumes.

    10. The water and electricity costs for the warehouse and office remain constant month to month,
    regardless of sales and production volume changes. R3 million of the water and electricity
    requirements of the factory are unaffected by production requirements. The remaining amount
    and majority of the cost is directly affected by production volumes.

    11. A royalty of 2% of revenue is payable to the manufacturer’s parent organisation for the use of
    patents and other copyright or protected material.

    12. Repair costs vary directly with production quantities.

    REQUIRED:

    Analyse each of these costs from an extract of the trial balance of Alpha Ltd using the following
    categories :

    (i) Manufacturing (state whether it constitutes direct material, direct labour or overheads) or
    non manufacturing
    (ii) Fixed or variable, with regards to production vol

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