ArtyFarty Ltd. manufactures handmade, individually painted clay plates. These plates are sold to stores that sell kitchenware. ArtyFarty Ltd. manufactures large and small plates. The cost price of the clay amounts to R5.00 for a large plate and R2.50 for a small plate. The price of the paint they use amounts to R4.30 for a large plate and R2.70 fora small plate, irrespective of which colour is used. Normally 2% of paint is wasted whenit dries on the paint brushes and pallets. The factory employs 10 ladies who, according to the budget, can produce 20 plates each (large or small) per day. The factory operates 230 days a year. These ladies are paid according to the number of plates they complete each month. 42 000 plates were completed during the year and a wage of R336 000 was paid out to the ladies. Variable manufacturing overheads amount to R1.20 per large plate and R1.00 persmall plate. Fixed manufacturing overheads amounted to R138 000 for the year. The size of the plate does not influence the apportionment of fixed costs. The closing inventory was as follows on 31 December 2021: Clay Paint Work-in-progress - large plates Finished goods - large plates Finished goods - small plates 210 kg 100 litres 50 320 280 The clay was purchased at R30 per kilogram in October 2021 and the current purchaseprice is R35 per kilogram. The paint was purchased at R80 per litre in November 2021 and the current purchase price is R75 per litre. In respect of work-in-progress 80% of the total cost has been incurred and it will cost another R215 to complete these plates. These plates have been painted. Due to changes in fashion trends the selling price of all the plates in closing inventory decreased dramatically in December 2021. Large plates can now only be sold at R9.50 each and small plates at R5.50 each. The decreased price is due to obsolete painting techniques and will not influence new production in 2020's selling prices. Selling costs amount to R0.50 per plate, irrespective of the size. Required: calculate the under-recovery of fixed overheads for the year ended 31 December 2021.
ArtyFarty Ltd. manufactures handmade, individually painted clay plates. These plates are sold to stores that sell kitchenware. ArtyFarty Ltd. manufactures large and small plates.
The cost price of the clay amounts to R5.00 for a large plate and R2.50 for a small plate. The price of the paint they use amounts to R4.30 for a large plate and R2.70 fora small plate, irrespective of which colour is used. Normally 2% of paint is wasted whenit dries on the paint brushes and pallets.
The factory employs 10 ladies who, according to the budget, can produce 20 plates each (large or small) per day. The factory operates 230 days a year. These ladies are paid according to the number of plates they complete each month. 42 000 plates were completed during the year and a wage of R336 000 was paid out to the ladies.
Variable manufacturing
The closing inventory was as follows on 31 December 2021:
Clay
Paint
Work-in-progress - large plates Finished goods - large plates Finished goods - small plates
210 kg 100 litres
50 320 280
The clay was purchased at R30 per kilogram in October 2021 and the current purchaseprice is R35 per kilogram. The paint was purchased at R80 per litre in November 2021 and the current purchase price is R75 per litre.
In respect of work-in-progress 80% of the total cost has been incurred and it will cost another R215 to complete these plates. These plates have been painted.
Due to changes in fashion trends the selling price of all the plates in closing inventory decreased dramatically in December 2021. Large plates can now only be sold at R9.50 each and small plates at R5.50 each. The decreased price is due to obsolete painting techniques and will not influence new production in 2020's selling prices. Selling costs amount to R0.50 per plate, irrespective of the size.
Required: calculate the under-recovery of fixed overheads for the year ended 31 December 2021.
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